Think twice before buying REO, short sale

Buyers want bargains. Some even limit their search to REOs and short-sale listings.

REO, or real estate-owned, refers to a property that a mortgage lender acquired through a foreclosure. It's owned by the bank. A short sale refers to a situation where the sellers still own the property but they can't sell for enough to pay off the mortgage(s) and costs of sale.

There are pros and cons to buying distressed sale properties. They often sell below market price. However with REOs, there is usually very little information about the property and no seller disclosures.

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