After the technology stock bubble burst in early 2000, people needed a new vehicle to make money in pursuit of the American Dream. With the wounds of the tech collapse just healing in late 2002, signs of a strong real estate market began to manifest with the decrease in interest rates. Investors looking for profits began to devour mortgage backed securities like CDO’s, collateralized debt obligations, which were basically made of groups of mortgage loans collateralized by people’s homes. This caused lenders to lower their lending standards, an increase in subprime loans, in order to originate more loans and package them into more CDO’s. With so many consumers being qualified for mortgage loans and the low supply of homes on the market caused prices to skyrocket. In the second half of 2006 with historically low interest rates, historically high housing prices, and subprime borrowers beginning to default the coming collapse was inevitable.
The collapse of the real estate bubble is history and is now our reality today whether you are buying or selling a home. The remnants of this collapse are two types of home sales that now dominate the landscape of much of the Northern Virginia real estate market, short sales and REO’s, a.k.a. foreclosures. These homes are spread out across Fairfax County, Loudoun County, and a larger concentration in Prince William County. The process to purchase one of these homes is not for the faint of heart because there are risks involved. Before going any further it is first important to know what are short sales and REO’s.
The basic definition of a short sale is a homeowner selling their home for a price less then what they owe on the loan, with the lender taking the loss at the time of sale. This can be a very frustrating process for the seller and buyer of a short sale because of the bank involvement dramatically slows the process and ads risk to the transaction. A more detailed explanation of what a short sale can be found in my article, What is a Short Sale. Get used to these because homes being short sold will be on the market in Northern Va for years to come.
REO stands for real estate owned, meaning a bank, lender, or investor have preformed a foreclosure and repossessed a property from the owner/borrower. Most people call these homes foreclosures but the correct term would be a REO since the word foreclosure actually is the process by which a lender legally repossesses the property. These homes still have some risk involved for buyers but they will get approved and go to settlement much faster than short sales. For more information and detailed explanation on Northern Va REO’s visit my article, What Are REO’s.
Buying Short Sales and Foreclosures/REO’s
Do you want to buy a short sale or foreclosure /REO and do not mind a little risk? Below are some articles with more detailed information for Northern Va home buyers wanting to take advantage of the down market. Call me for a free consultation to determine if these types of property are right for you.
Selling REOs and Short Sales