The Real Estate world is always full of confusing terms, part of our job is to de-mystify them for you, the client and reader, to allow you to understand the opportunities that are out there for you!

Being Short Sale and Distressed Property experts, we are the leaders in the Ann Arbor Bank Owned and Short Sale Market.

Realty Times has recently written an article discussing investing in Bank Owned Properties, (REO’s), and Short Sales. However with much press at the moment about foreclosures, how are you to know the difference? Well, here is, in short, a handy guide showing the salient points:

Bank Owned Properties:

Who Owns This Type of Property?: Typically a bank or a national servicer.

Offer Process?: Standard purchase and sale agreements are used as well as the banks’ own addendums and disclosures. Before a Bank forecloses they have one or more brokers provide an opinion of value. (BPO) Then at the time of foreclosure/listing they have the listing broker determine if that value is still valid. Most of the time the Bank is pricing the property near market value and is expecting to sell the property close to the asking price. Note that with regards to repair contingencies, the Bank prefers not to make repairs to the property so an “as-is” sale is common.

Money/Financing: Earnest money will need to be in the form of a cashier’s check. Proof of funds for the down payment and loan approval for the balance will also need to accompany the offer. If financing may be difficult for you then perhaps rethink this type of sale.

Closing Dates and Timing: The quickest turnaround time is best. Be prepared to move quickly. This is why there are so many cash deals for these types of transactions. Once a buyer’s broker has submitted all the appropriate paperwork in accordance with the bank’s rules you may receive an answer within hours or it may take up to a week. Be patient!

Short-Sales: (See our guide - Three Qualification for Short Sale)

Who Owns This Property?: Legally the property is owned by a person or entity (e.g. company - LLC, Corporation, Trust, etc) and the house could be occupied or it could be vacant. However, this is a negative equity situation and the owner needs lender approval to affect the sale.

Offer Process?: A standard purchase and sale agreement is used along with an addendum acknowledging the fact that this is a short-sale transaction. It’s listing price for the property may be well above, at or below market. As with REO’s, repairs are unlikely and uncommon. Therefore “as-is” contracts are common.

Money/Financing: Earnest Money should be in the form of a note that is converted to cash (check to Escrow) after acceptance or even after removal of the inspection contingency. Also you should supply proof of funds for down payment and pre-approval from the lender for any new loan to make your offer stronger. Being prepared with paperwork is key here and supplying as much information about how strong a buyer you are will help.

Closing Date/Timing: Closing can occur within 30 days but the 30 day clock will not start until the lender gives their approval – The approval process may take one week or it may take up to three months. Watch out that while you are waiting the bank does not foreclose making your deal void!

In short - have patience and persistence and you may be successful with short sales! The National Association of Realtors has published a “field guide for short sales” available here.

However the best thing for any complex transaction like bank owned properties or short sales is to have the assistance of a knowledgeable team behind you. So call us, today for assistance with bank owned properties and short sales.

To view Ann Arbor distressed sales this week, please go to http://kathytoth.com/foreclosure_deals. Click here to search Ann Arbor Real Estate using our complimentary Ann Arbor Real Estate MLS Search service. Alternatively please contact Kathy Toth and the team if you need more specific assistance in your Ann Arbor Real Estate needs.