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Discover the greater Charlotte Real Estate Market and consider the factors that impact the value of your home. Learn about Charlotte Suburbs, Charlotte Land values, Charlotte Foreclosures and much more.

Foreclosure, HUD, REO or Bank Owned Homes?

There remains a lot of confusion about various terms such as HUD Homes, Foreclosure Homes, REO Homes and Bank Owned Homes.  What is the difference?  Is there a difference?  Yes and no.

A foreclosure is technically the procedure the bank/mortgage company takes possession of a debt that is not getting paid.  You do not pay the money you promised to pay the bank, the banks options is to foreclose and take possession of the home.  This is done via the legal proceedings as dictated by each state.  There is a public auction held and anyone can offer to purchase the home for the amount listed.  Keep in mind than when purchasing at auction there may be additional liens on the property that you are automatically also assuming.  In addition to potential evictions and up-bidding after the auction is over.  You really need to have complete knowledge of this process before venturing into a true foreclosure.

The vast majority of the time the bank/mortgage company must buy back the home (more money is owed than anyone is willing to pay).  The bank now owns the home (bank owned home).  This is also called REO (Real Estate Owned) which is just another word for "bank owned homes".  The bank now owns the the "non performing asset".  This is a fancy way of saying it has taken possession of a bad loan. 

The bank then prepares the home for sale.  The mortgage company clears all lien obligations, follows the eviction process, has market evaluation to determine what the fair market value would be of the home based on the actual condition (prior to the "Foreclosure" there is no legal means of determining the condition of the home because the "buyer" still has legal possession).

The "asset manager" now has the responsibility of recovering as much of their losses as possible.  They market the home with a Realtor in order to get the most money possible.

How about HUD Homes, Fannie Mae Homes, Freddie Mac Homes or VA Homes?  Are these foreclosures?  "Technically" no.  This is actually just splitting hairs but political correctness states that HUD homes are not to be called HUD Foreclosures.  Technically they are right.  HUD and the other government agencies "insured the loans" that the mortgage companies made.  The Government agencies tell the banks that "here are our standards" for lending.  You lend the money and we guarantee it.  The purpose of these guarantees is because the risk is higher than the banks can possibly risk.  The Government says "if you lend to our standards" we will reimburse you if the buyer does not pay.  In exchange, we get the house.

The bank loans the money.  The buyer does not pay.  The bank forecloses.  The bank determines the home is no longer worth what was owed.  The bank then basically "makes and insurance claim" and returns the home to the Federal agency that wrote the guarantee.  This could be HUD, Fannie Mae, Freddie Mac or one of several others.  The last owner was foreclosed but the Federal Government "technically" did not foreclose on the delinquent home owner.

Visit my other blogs or my Charlotte Real Estate website.  You will find an abundance of information.  If you would simply like to find a great deal in a home, call me at 704-770-6559 today for a great home in the greater Charlotte Real Estate market.

Published Tuesday, June 21, 2011 9:49 AM by Rick Waite

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