If you're in the market for a home, you may be seeing lots of them listed as an "REO" or "short sale" or "foreclosure" when viewing properties for sale. Perhaps you've been seeing notices of Trustee Auctions in your area. The best way to make sense of these "distressed" property labels is to understand:

• What each term means.
  
  
• Who the current owner is.
  
  
• What the process to purchase the home involves.
  
  
• Where good deals may be found.

There are lots of bargain properties on the market in our area today. Not all of them are distressed properties, nor are all distressed properties really bargains, once you factor in the costs of making them livable and up-to-date.

No matter what type of property you're looking for -- whether a distress or equity sale -- we can help you make sense of the offerings currently on the market and help you find the best value for your money. Turn the page to learn more.

SHORT SALE
A homeowner offering a short sale is trying to sell the property to avoid foreclosure and is likely to be delinquent (late) or in default (not paid) on their mortgage for several months due to a qualified hardship. Also, the home's value is less than the mortgage amount the homeowner still owes the lender. Besides the seller and buyer agreeing on a contract, the mortgage holder must also approve the sale, which can involve a lengthy wait. Lender response times vary, and the seller's lender may reject the contract outright.

A new program to facilitate short sales of homes financed by certain lenders was launched April 5, 2010 -- the Home Affordable Foreclosure Alternatives Program (HAFA). Among other features, the program implements a standard process with mandated timeframes and deadlines.

FORECLOSURE AUCTION
A foreclosure property results when the homeowner defaults on the mortgage and the lender puts the property up for auction by a professional auction company through a "trustee's sale" or "sheriff's sale." Many of these properties are not open for tours or inspections by prospective buyers. Buyers working with a buyer's agent should check with the auction company to find out how/if their agent would receive compensation should their bid be accepted.

Auction properties may come with unpaid liens, back taxes and title problems, and eviction proceedings may not have been completed -- all problems that become the purchaser's responsibility to remedy.

EQUITY SALE
An equity sale is a normal sale by a homeowner/borrower who has sufficient equity to pay back all lien holders.

PRE-FORECLOSURE
Pre-foreclosure homes may or may not be a short sale, for example, if the owner can't prove hardship or the home's value exceeds the mortgage still owed. The current owner of the home may be delinquent or in default on their mortgage and is trying to sell before a foreclosure process begins.

REO
A real-estate-owned (REO) property is a home owned by an institution (lender, government agency, company, etc.) that now possesses the property instead of an individual homeowner. Perhaps the property did not sell at a foreclosure auction or the company acquired the home from a relocating employee and now it is listed for sale by a real estate professional. REOs can be inspected and viewed the same way as with other homes listed for sale. The home is often free and clear of liens and other encumbrances that would delay a sale or deter buyers. Often these properties are priced competitively to get them sold quickly. Many are sold "as-is," meaning the seller will not repair or replace any problems found by an inspection.

BANK OWNED
Bank-owned homes are REOs that became a bank's or lender's property after failing to sell at a foreclosure auction.

• A home that must be sold to pay off a mortgage that is in default (missed payments).
• A home that can be in any condition -- as is to move-in.
• A home that may or may not be able to be purchased for under its true market value.