When navigating the complexities of buying a home, understanding different types of foreclosures can be crucial. Non-REO foreclosure, a term that might sound complex, involves properties that have not yet been reclaimed by a lender despite going through the foreclosure process. Here’s a breakdown to help you understand what this means for buyers and sellers.

Understanding Non-REO Foreclosure

Non-REO foreclosures occur when a property is foreclosed but does not become Real Estate Owned (REO) by a lender. This typically happens when the property is sold at a foreclosure auction before the bank reclaims it.

How It Works

1. Short Sale: A homeowner sells the home for less than the mortgage owed with the lender’s approval.

2. Foreclosure Auction: Properties that don't sell in short sales are often auctioned.

3. Foreclosure Relief and Special Considerations: Various programs, including those introduced under the CARES Act, provide foreclosure relief to homeowners.

Comparing Non-REO to REO

Unlike REO properties, which are owned by banks post-foreclosure and often sold below market value, non-REO properties are typically purchased during auctions, potentially offering savings and opportunities without the bank as an intermediary.

Pros and Cons

Investing in non-REO properties can be less competitive than REO purchases and may offer lower prices, but buyers must navigate the auction process, which can include hidden costs and risks like unseen property damage.

Understanding these elements can help you decide whether venturing into non-REO foreclosures aligns with your investment goals and risk tolerance.