Real estate agent Natalie Feldman summed it up beautifully:
“A short sale occurs when the lender agrees to take less than the full loan payoff of an owner’s property. The homeowner is most likely behind on payments and owing more than the home is worth.
Foreclosure is where the bank takes possession of the property because of non-payment for a long period of time or an unapproved short sale.
An REO is a bank-owned property (“real-estate owned”), when homes go into foreclosure they are sold at a trustee sale, if no one purchases it at the trustee sale, they become REO properties. Later they are often listed by Realtors hired by the bank.”
Agent Mike Scherer then chimes in that short sales are not really short; they actually take a long time.
Have a real estate question? Ask it in Zillow Advice.