REO, a.k.a. Foreclosure, a.k.a. Bank Owned -- the bank has already foreclosed and the former homeowner is long gone. In Arizona, there is no "Redemption Period" after a foreclosure during which the former owner can reclaim the home. Once the bank has foreclosed on an owner, it's game over. The bank owns this house outright and is selling it, almost always using a Realtor and an MLS listing. (There are extremely rare situations where a bank forecloses and doesn't obtain clear title to the home. How rare? In a combined 13 years of practice in metro Phoenix, we at ThePhoenixAgents have seen this happen once.).
Pre-Foreclosure - Treat these as "Short Sales".
Short Sale - In this case, a homeowner is trying to sell at today's prices which will not completely pay off his/her mortgage, and seller won't or can't bring enough money to the closing table to pay off the mortgage. The seller's lender will be left with a short payoff, hence the name. If the seller can't get his/her lender's approval of the short sale, the sale will not happen.
Short Sales are sometimes great bargains for buyers, but these homes are frequently sold without any disclosures about condition, and are almost always sold As-Is. Buyers can inspect the house but Sellers/Lenders won't do any repairs.
Then, there's the Short Sale Waiting Game. Lenders are overwhelmed, they were never set up to operate a real estate brokerage in the first place, and will probably take a month or more to even acknowledge receipt of a Buyer offer. Total wait time can vary wildly depending on which bank you're dealing with. What are "normal" wait times? I've seen 2 to 9 months, with a personal record of 13 months from offer to closing (30-day escrow).
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