Short Sales,
Foreclosures and REO’s….., oh my.
The
Real Estate market has become a jungle entangled with unknowns; whether it be a
foreclosure or REO many of today’s buyers don’t know what they are getting
themselves into. Without an
available mapping system to explain each and every transaction on a
case-by-case analysis, most are left in the dark. Without access that “map” or
a firm understanding of each and every listing you approach you can easily put
yourself at risk. It’s not as easy
as just finding the perfect house anymore. If you are home shopping be sure you or the Realtor you are
working with knows what’s what.
Short Sales
We
have all heard the term short sale by now, it’s almost as common as Charlie’s
“Winning”. A short sale is in
essence when the homeowners mortgage lender allows said homeowner to sell their
residence at a lower price then currently due on their original mortgage. If you are underwater, the bank will
take 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 map it out. The most
important factor to look for is if the short sale is approved or not.
Listing agents will advertise this, if they don’t you can simply call
them and ask how far along the process is. This will give a fair barometer on your chances of success.
Foreclosures
A
true foreclosure is a court sale, so generally you won’t see foreclosures as
listed property. (This may be
argued as some counties do now pre-advertise the sale prior to auction) When purchasing at the
courthouse, you may hear that the sale is on the “Courthouse Steps”, you will
need to pay the entire portion of the purchase in cash within 24 to 48 hours
depending on County. This will
take this option off the table for most homebuyers, as this is an investor-saturated
world. We all know cash is king. However, if you are looking at a
home that was a foreclosure be sure to ask about open liens prior to making an
offer. You don’t want to find out
25 days in that there is an open electrical permit and the home can’t close
without inspection and possible code violations. $$$ It adds up.
REO’s
An
REO is a bank owned home, which may make you say – then REO is a dumb name… it
stands for “Real Estate Owned” – as in Real Estate owned by the bank. This means that the previous owner
either could not sell short, or the bank would not allow it. In some cases the bank may want the
home back due to equity involved, if they stand to make some money – trust me
they’re taking it. Some REO’s
however are homes that no one else wanted. My first question when viewing an REO is “why is it here” as
in why has someone else not grabbed it yet. The owner couldn’t sell, the courthouse vultures didn’t bite
and now the bank is sitting on it.
Unless you are ready willing and able to do significant home repairs,
you may want to leave these to the investors.
There
are plenty of wonderful “standard” sales on the market today, and the short
sales and foreclosures of 2009 and 10 have lowered values significantly. Be sure to always look for the best deal, just remember the
best deal isn’t always a short sale or the like. If you have any questions about this article or
anything at all Real Estate related please email me at rick@rickrapp.com
