Indianapolis Area Real Estate Blog

Real Estate Terms - Distressed Properties

Distressed homes for sale tend to get lumped tgether, but there are some distinct diefferences between these type of sales. Most are simply called foreclosed homes. These are the terms used by our local Board of Realtor listing service to describe distressed properties, as well as the definition of each.

Bank Owned - This is a home which has been foreclosed on and is now owned by the bank. This is also often referred to as REO or Real Estate Owned, which simply means it is real estate owned by the bank.

HUD Owned - Also a foreclosed home which is now owned by Housing and Urban Development. This is not owned by a bank. The bank foreclosed and HUD was the mortgage insurer, so HUD owns the home.

VA Owned - A foreclosed home now owned by the Veterans Administration.The Veterans Administration guarantees the mortgage for 25% of the loan value in the case of default. They then become the owners of the property after foreclosure.

Pre-foreclosure - A home which is facing imminent foreclosure.

Short Sale - A home which is being sold for less than the amount owed on the current loan. Short sales are often listed as pre-foreclosure.

In the case of bank owned, HUD owned or VA owned, the homes are now owned by the entity that carried the mortgage insurance or the bank which holds the note or motgage at the time of foreclosure.

Pre-foreclosure and short sale properties are homes which are still occupied or owned by the current homeowner of record. These sales always require the approval of the current mortgage holder.

Homes which are sold under any of these circumstances almost always have special addendums which are required by the bank or Federal office currently holding the property.


#1 By JCL at 12/16/2008 7:12 AM

All the more reason to have a good agent to guide buyers through the process!

#2 By Home Inspector at 11/28/2008 4:33 PM

I work alot with foreclosures with my home inspections. The terms can overwhelm the buyer and it is common for buyers to think it is sold as is, however I am seeing alot more banks making repairs in efforts to get the property sold. Good article.
Thank you,
Home Inspector

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