There are a lot of ‘catch phrases’ that are being slung around in the media today. Before you can consider selling your home as a short sale or purchasing a foreclosure, you might need to know what they are… or first, what the difference is between them. Pre-foreclosure – Before a home is ‘foreclosed upon’, or even before a home is officially in the ‘foreclosure’ process, the Seller is deemed to be in pre-foreclosure. They may only be one or two payments behind on their mortgage. They may even be further along in missed payments. Regardless, they have not yet been served, and neither the court nor sale date has been set. In either case, the home is usually referred to as a pre-foreclosure, because it is BEFORE the actual foreclosure proceedings take place.
*As a side note, please know that the foreclosure process varies from state-to-state. We are located in North Carolina, and thus when we speak of the foreclosures, we are speaking of the non-judicial process.
Foreclosure – Many people use the term ‘foreclosure’ as a general, catch-all word for distressed properties. However, it is a littlemore specific than that, because as we just read, an owner may be behind on their payments, and they may be facing the possibilityof foreclosure, but they may not have yet been served. However, once the seller is served (receives notice of the default and isapprised of a court date to determine if a sale may be set) then the home may be more specifically referred to as a ‘foreclosure’.The problem with this term is that most people refer to homes owned by banks as foreclosures.
REO – An REO is a short term for Real Estate Owned. This is the term that I prefer to use when referring to what most peoplecall foreclosures. Typically, when a property is sold on the courthouse steps, if an investor does not purchase it, then it is almostalways purchased back by the bank or lender. When this is the case, it becomes part of the lending institution’s inventory – andas such, it is called an REO. It was a foreclosure, but it is now an REO. And that is the difference.
Short Sales – Short Sales are becoming more and more popular, as more and more home sellers are in financial distress and findthat their homes are not worth as much as they owe. So, let’s spend a little more time and go into greater detail on short sales
HAMP- The homeowner affordability and stability plan (HAMP) worth $75 billion has been announced by President Obama.This is also known as Obama’s Home Loan Modification. The principle of this plan is making the loan modification affordable.Obama’s Loan Modification Plan is constituted of two parts.
HAFA – HOME Affordable Alternative -In 2009, the Treasury Department introduced the HAFA program to provide a viableoption for homeowners who are unable to keep their homes Affordable Modification Program. The HAFA program takes effecton April 5, 2010–– although some services may implement it sooner, if they meet certain requirement–– and sunsets onDecember 31, 2012.
HAFA provides certain incentives to services and sellers, attempts to standardize procedures and shortens time frames, but only on loans eligible for modification under the HAMP program.
