Foreclosures, Shortsales, Bank-Owned Properties Explained

Foreclosure is the process by which a homeowner’s rights to a property are forfeited because of failure to pay the mortgage.  If the owner cannot pay off the outstanding debt or sell it via short sale, the property then goes to a foreclosure auction.

A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt.

If the property does not sell at auction, it becomes the property of the lending institution, or a bank-owned property or REO (real estate owned).  The bank or lending institution will sell the property on its own using a real estate agent or via its own method (liquidation auction, etc).  Large lending institutions, such as Fannie Mae, may use their own branding platforms to sell these REO properties. You may be familiar with Homepath which is the branding used for all Fannie Mae-owned properties.


  1. […] market is improving but there are still plenty of bank-owned and auction homes for sale due to foreclosures that have finally processed.  During the past 6 […]

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