15 Facts about Short Sales, Auctions & Bank-Owned Listings

Short sales, auctions and foreclosures hold the promise of huge bargains. You can get a deal, but buying a distressed property also involves taking some huge risks.

As more distressed inventory piles up on the market, the only way you can be successful is to be informed. Unfortunately due to the amount of work required and low success rate for short sales, Redfin no longer services them. However, Redfin does service MLS-listed foreclosures, also known as REOs.

Here are 15 things you need to know if you're getting into this game:

1. Not 'til the bank says so
   Short sales must be approved by the bank that owns the mortgage, and that can take months.
   
   
2. Take it or leave it
   Short sales are sold as-is – there's no negotiating for repairs.
   
   
3. There's constant competition
   Short sales don't come off the market until the bank approves your offer. Meanwhile, other buyers can compete for the property.
   
   
4. Ask your agent
   To know if a listing is short sale, you'll need an agent to look at the agent-only remarks.
   
   
5. Don't get your hopes up
   Short sales rarely close. If you're set on buying a short sale, be prepared to make offers on many homes.

1. Bring cash
   There's no financing – you'll need to pay the full amount if you have the winning bid.
   
   
2. Pay the auctioneer
   Auction fees can be as high as 9% of the sales price.
   
   
3. Take it or leave it
   You buy the property sight unseen and as-is.
   
   
4. Buyer beware
   There's no title insurance –any liens on the property are now yours.
   
   
5. You're Mr. Bad Guy
   You may have to evict the previous owner (with the sheriff's assistance).

1. They're listed in the MLS
   A broker lists the home in the MLS and handles the sale.
   
   
2. Don't expect repairs
   REOs are generally sold as-is. The bank will make the necessary repairs to make the home livable, nothing more.
   
   
3. Get the home inspected
   You should know the exact condition of the home even though you won't be able to get the bank to pay for most repairs.
   
   
4. Buy title insurance
   Protect yourself against any defects or liens attached to the title.
   
   
5. Get ready for some heavy lifting
   REO properties often require a lot of renovations.

On Redfin.com, we show all the MLS listings for sale, including short sales and REO properties. We show foreclosed homes A home where the owner is unable to make his mortgage loan payments and the bank has begun the process of repossessing the home. in various stages of the foreclosure process Foreclosure is a process that transfers the right of home ownership from the homeowner to the bank or lender. A home goes into foreclosure when the owner stops paying his mortgage loan payments. with purple icons on the map. These homes are on the bank's website and likely not for sale.

• Frank Llosa explains why he calls short sales "fake listings."
• A story from the Los Angeles Times on how difficult short sales can be.
• Foreclosure heat maps from hotpads.com.
• An explanation of how a foreclosure auction works from RealtyTrac.

• What is a short sale?
• Frustrations with a short sales and REOs in Southern California, the San Francisco Bay Area and Boston.
• Buying an REO home.