As promised, I am going to give you my experiences with Short Sale, REO and owner sales.  Disclosure; every sale is different.  I can only give you my experiences.

SHORTSALE

Honestly, I think these should be called long sales because they take longer than any other deal to close.  A Short Sale means the owner is short of funds in the sales.  Example:  Seller Sam bought a home and paid $200,000 for his home.  His financial situation has changed and he is no longer able to pay his mortgage.  His home is now only worth $150,000.  If he sells his home, he will be $50,000 short on the money he can give the bank.  Simply put… that is a Short Sale.

Now what does this mean for Buyer Bob?  Make sure your Realtor is familiar with the Short Sale process.  It has been my experience that the process takes a minimum of 3 months to 2 years.  If you find a home you like and it is a Short Sale, be prepared to be patient.  Your Realtor will write up a contract and submit.  It may take weeks or months to get a response on your offer.  If you have the time, this is a great way to go.

REO

This is Real Estate Owned by the bank.  The bank or lender has already gone through the trustee sale and now owns the property.

In most cases, a lender will put a property on the market and allow Residential buyers to place bids for the first 10 days or so.  After the initial period, if they do not have a potential buyer, they will allow investors to make offers on the property.

The seller will hold all offers for a few days and submit at all of them one time to the lender.  There may only be one bid but they will contact you again and ask for your highest and best offer.   Many times a buyer wants the house so much that they will bid higher than list price.  The offer process can take a few weeks but once your offer is accepted, it can go quickly.

Short Sales and REO properties can be a great way to buy a home but you should understand that the down side is they have no knowledge on the history of the home.  Even though most buyers think the best deal is a Short Sale or REO, I find the Owner properties will negotiate with you.  An Owner property will also give you the history of the home your buying.

No matter which way you go you always have to put your I before you E, intelligence before your emotions and you should be ok.  And you should be working with a great Realtor… like me!