Short sales, foreclosures and REO, oh my!
The real estate market has become a tangled jungle of unknowns; Whether it’s a foreclosure or REO, many of today’s buyers don’t know what they’re getting into. Without a mapping system in place to explain each and every transaction on a case-by-case basis, most are left in the dark. Without access to that “map” or a firm understanding of each and every listing you approach, you can easily put yourself at risk. It is no longer as easy as finding the perfect house. If you’re buying a home, make sure you or the real estate agent you’re working with knows what’s what.
dirty shorts
We’ve all heard the term short sale by now, it’s almost as common as Charlie’s “Win”. A short sale is, in essence, when the mortgage lender allows the owner to sell his residence for a price lower than what is currently owed on his original mortgage. If it is underwater, the bank will bear the loss. As common as this transaction has become, many buyers still don’t understand the full story involved. Many short sales can still be a waste of time, but there are others that CAN be great deals, you need to plan for them. The most important factor to consider is whether or not the short sale is approved. The listing agents will announce this, if they don’t you can simply call them and ask how far along the process is. This will give you a fair barometer of your chances of success.
foreclosures
A true foreclosure is a short sale, so you generally won’t see foreclosures as a listed property. (This can be argued as some counties pre-advertise the sale prior to the auction) When buying at the courthouse, you may hear that the sale is in the “Courthouse Steps”, you will need to pay the full portion of the purchase. in cash within 24 to 48 hours depending on the county. This will eliminate this option for most homebuyers, as this is a world saturated with investors. We all know that cash is king. However, if you’re looking for a home that was foreclosed on, be sure to ask about open links before making an offer. You don’t want to know 25 days that there is an open electrical permit and the house cannot be closed without inspection and possible code violations. $$$ Adds up.
CONVICT
An REO is a house owned by a bank, which may make you say: so REO is a silly name… it stands for “Real Estate Property”, as in Bank-owned Real Estate. This means that the previous owner could not sell short or the bank would not allow it. In some cases, the bank may want to repossess the house because of the equity involved, if they can make some money, trust me, they are taking it. However, some REOs are homes that no one else wanted. My first question when I see an REO is “why is it here?”, like why hasn’t someone else taken it yet. The owner couldn’t sell, the court vultures didn’t bite and now the bank is sitting on it. Unless you’re willing and able to do major home repairs, you may want to leave it to investors.
There are many wonderful “standard” sales on the market today, and the short sales and foreclosures of 2009 and 10 have brought values down significantly. Make sure you are always looking for the best deal, just remember that the best deal is not always a short sale or the like. If you have any questions about this article or anything Real Estate related, please email me at [email protected]