What Does AMA Mean in Real Estate?
AMA stands for all measurements approximate REO – real estate owned. It simply means that the real estate is owned by the bank due to foreclosure. As one of the lesser-used abbreviations in real estate, you will seldom see it written in listings.
An agent typically uses it for real estate marketing purposes. When a short sale or an auction takes place, the property is sold at a lower price as the bank simply wants what’s due to it. Meaning that the property is put up in the market as it is and any offer is entertained as long as it covers the mortgage.
When real estate is owned by the bank, it is added into the inventory as a result of not being sold in the foreclosure sale. The property is acquired by the bank when the homeowner is not able to pay the mortgage. Once the property gets the “foreclosure” tag, the property’s price is discounted.
The sale or an REO takes place depending on the state and location of the property. The AMA is likely as a result and since the real estate has plenty of repairs, its market value automatically goes down.
One of the best things about such properties is that they tend to have low down payments and low interest rates. Since the house has an NSF non-standard form, the bank likely will try to sell the property quickly. Potential investors and homebuyers can easily find these properties online or through local lenders and real estate agents.
Lenders who hold such properties are usually credit unions, banks, or any other kind of financial institution. The process starts with the real estate being transitioned into a foreclosure NSF non-standard.
Many lenders give a homeowner a grace period, which is a specific amount of time, in which they can make their missed payments. This is usually 30 days and if the homeowner still fails to make the payments, the house goes into foreclosure.
The property is then put on an auction. If the property receives no buyers during the foreclosure sale then it is considered REO and the bank becomes its new owner.
What is foreclosure NSF non-standard?
When a successful foreclosure takes place, the house is up for grabs. It can be either put on sale by the lender who is acting on behalf of the bank or a real estate agent. This is why they say real estate owned, meaning that the title of the property does not have a name.
How a foreclosure works
In a mortgage loan, it’s the property that is typically used as collateral. It means that the lender has the right to take possession of the estate if the borrower is not able to make the monthly payments. The moment a single payment is delayed, the lender notifies the borrower that their grace period has started.
The bank then sends the borrower a demand letter that warns them that if a payment is missed again, they will lose the property. After 90 days of continuous missed payments, the borrower receives a notice of default.
At this stage, some lenders extend the grace period and give the borrower more time to make arrangements. However, if the payments are still not made after this, a foreclosure sale takes place, which is a legal process, in which the house is sold at an auction.
What about a short sale?
A foreclosure can destroy your future chances of buying a house. Every payment you miss goes as a negative marking on your credit report, which stays on it for 7 years. This is why you should first sort out your financial situation before making such a huge decision. Since buying a house is a big investment, you need to be sure that you will be able to make the mortgage payments on time.
Let’s say that you are planning to buy a house. You apply for a loan and the bank approves your application. You sign the papers and from the next month, you start making your monthly payments.
After a year, due to cuts, you are laid off from work. You try to cover your expenses by doing part-time jobs but the money is just enough to pay for the bills and your personal needs. When you miss the first payment, you receive a notice from your bank.
On the second missed payment, an agent from the bank calls you to tell you that your grace period has started. You explain to him the financial trouble you are in and he agrees to extend the payment date. However, as the date draws near, you don’t know what to do. A foreclosure won’t look good on your credit report, which is why you are trying to avoid it.
It’s then that one of your friends recommends that you put the property on a short sale. That way, you will be able to sell the house quickly and pay off the rest of the mortgage.
Usually, in a short sale, the property is most probably sold at a low price, which means that if the remaining mortgage loan is not covered by the money you receive, you will have to add to it out of your pocket. If still the payment is not made on time, the bank will charge a late, which is 5% of the principal and interest due.
Real estate owned vs. Non-REO foreclosure
A non-REO foreclosure becomes a real estate-owned property when an auction takes place but no buyers approach the property. Even they do, the offer is lower than the minimum bid. In an REO property, the ownership of the property is assumed by the lender, and the bank posts the details of the house only, in order to resell it.
Sometimes, banks take help from real estate agents to speed up the sale. To entice buyers, the property is sold at a discount and some of the fees associated with the title are eliminated. This is why an REO property is a good investment over a non-REO foreclosure.
However, both non-REO foreclosures and REO properties require extensive repairs. If you wait for the property to be labeled as bank-owned REO then you miss the chance of bidding on it in an auction.
One of the biggest advantages of REO-foreclosures is that it allows buyers to attend auctions and find out how much the property is worth. The auction benefits both the seller and the buyer. The latter might be able to raise enough money to pay off the entire mortgage and the former gets to buy a house at a lower price, no matter what the current market value is.
When a listing mentions AMA all measurements approximate, it means that the real estate is owned by a bank. In this case, REO and AMA stand for the property that hasn’t been paid in full by the homeowner, and as a result of foreclosure NSF, the bank offers the new buyer a discount on said property.
If you are looking for such properties then you should contact your real estate agent and ask for houses that are on foreclosure sale. Keep in mind that since the property is being sold at a moment’s notice, it could be an estate with too many repairs. Think of it as a fixer-upper. As an investor, you are more likely to benefit from the estate. Make sure to search on the other houses in the area to find out their real market value. Comps will give you a better estimate and allow you to renovate the property accordingly. Once you have collected the data, you can start marketing to the right audience.