The media is abuzz with economic terms that many American's have never of heard of before.
"Short sales," "REO" and "distressed properties" are all catch-phrases that are being thrown around without clear cut definitions. All three of the words deal with properties in various stages of the foreclosure process.
Short sales are the process of selling a property before it is officially foreclosed with permission from the mortgage holder. REO is a real estate owned property meaning the financial lender is now the owner due to default payments from the original homeowner. Distressed properties are under foreclosure order and is being advertised as "for sale" by the lender.
But what are distressed properties?
Dictionary.com defines distress as "great pain, anxiety, or sorrow; acute physical or mental suffering; affliction; trouble," which is certainly the case for the distressed properties in question. Distressed properties are wrought with financial trouble as the original owner is struggling or has defaulted on paying off the complete amount of money owned on the mortgage. Commonly homes become distressed properties for a variety of reasons including:
- Foreclosures
- Preforeclosure
- Bankruptcies
- Tax Liens
When a home is on the cusp of foreclosure or the sale date is already being promoted by the original lender (and now current owner, they are considered distressed property.
Homes quickly become distressed properties when there is substantial amount of debt, such as taxes or mortgages, that are not being paid off in a timely fashion by the property owner. Debt collectors for those loans can commonly start proceedings to sell the real estate and the income brought in will be used to pay off the outstanding debt.
The laws regarding the sale of distressed properties vary from state to state. Because of the fluctuations, depending on where you reside, distressed properties can remain as such from anywhere from a couple of weeks to over a years time.
