The current market offers a smorgasbord of deals for the
buyer with money to put down, good credit, and patience. For first time homebuyers or those struggling
with down payment and credit issues, your best bet is still going to be going FHA with a normal seller situation. But for those with something to bring to the
table, there is plenty to choose from.
Below is a sampling of the types of deals available and the benefits and
risks of each.
REO
REO stands for Real Estate Owned property and it is property
that is owned by the bank. REOs are
properties that have already been through the foreclosure process, to the
auction, and are now offered back on the market. Banks will hire REO specific real estate
agents to help them sell these properties.
Pros
Often can get a good price below market value. Banks want to close quick on
these properties to get them off their books.
Cons
The homes can be trashed and banks want you to sign an "as is"
addendum so you get no warranties.
Short Sale
Short Sales are properties where the seller owes more than
the property is worth. Instead of
bringing money to the closing table in order to get out from under the property, the seller may be able to sell the
home "short" or for less than it is worth.
This is where the buyer comes in and picks the home up at a discount
often at 70%-80% of market value. The key here is getting the bank to agree.
Pros
Below market value.
Cons
These things can take forever. The bank is not excited about taking a loss
and is in no hurry to accept offers and close.
That is why it is imperative that the agents on both sides of the
transaction prepare the paperwork as meticoulously as possible to encourage the
mitigation companies at the banks to accept the offers and close.
The Auction
You buy at the auction when a trustee fulfills his legal
duty as part of the foreclosure process and offers the property for sale at a
public auction to the highest bidder.
This can be a quick way to get a great deal. But I would not do it alone the first time. I recommend
Vestus.com for help with this.
Pros
Quick way to get a good deal on the property. Also a clean way to get title since all
junior lien holders lose all interest to the property when it is sold at the
auction
Cons
There is high risk here because you don't get time to do
your due diligence. Make sure you know
what you are buying before you go to the auction and start making bids
Pre-Foreclosure
In a pre-foreclosure deal, you negotiate directly with the
seller to purchase the property from them before the property is foreclosed on
them at the auction. The seller will
need enough equity in the home to make this kind of deal work.
Pros
The seller gets out from a home they can not afford. Able to inspect property prior to purchase. Flexibility on terms.
Cons
Can take a lot of legwork on the investors/buyers side to
find the right buyer. People who are
having problems making payments are constantly contacted by buyers looking for
a pre-foreclosure deal.
If you need help getting started,
contact me and point you in the right direction. Or if you are ready to go and want lists of short sale and/or REO properties
fill out this form and indicate they type of property you are looking for. Thanks for
reading!
All data taken from the WFRMLS. Information reliable but not guaranteed. All rights reserved Mark Alder ©, A Salt Lake City REO Real Estate Agent cell (801) 979 6275
;)
;)
Mark,
Great tips here and a great consolidation of the facts people need when looking at this type of property.