There are a couple different classifications for distressed property sales.
1 – Short sale. This is when the owner of the home sells the home for a price that is lower then what is owed on the mortgages. In this scenario the owner has taken the proper steps with the lender or lenders so that these lenders will accept a short sale. Without going into to much detail the lender actually has final approval on this transaction. Most qualified Realtors can represent you when trying to buy a home that is a short sale.
2 – REO (Bank owned) homes have been owned by the lender. The home has made it through the foreclosure process and is now for sale. In general again, your Realtor can represent you. Know that since the bank owns this property they may impose conditions that are more stringent. For instance, since the bank owns the property but never occupied the property, they will not be able to give you very accurate disclosure information. They will most likely insist that you sign liability releases that absolve them of any liability concerning disclosures. You can still work with the lender of your choice however they will give the nod to people who are coming in with more of a downpayment then those who finance a large portion or all of the purchase in the event of multiple offers.
Auctions – Prior to a home becoming bank owned, it moves through the foreclosure process. The home will be placed in an auction and can be purchased by you or any other private party at the auction. Auctions are attended by lots of people most of them who are very experienced at attending them and who have purchased homes through that process.
