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Distressed Property Sales

By
Real Estate Agent with eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales B.R.E. 01191194

 

 

Short Sale:

 

 A short sale occurs when a seller wants to sell his/her home but owes more to the bank than the home is worth.  They will then negotiate a sale with a buyer and then ask the bank to agree to the terms of a sale which means a loss for the bank.

 

The Pros:

 

  The hope is that the bank will be willing to take a loss before foreclosure rather than have to wait for the foreclosure process to occur, and then have to take a loss anyway.

 

Because it takes so long for an answer the buyer can make offers on multiple properties and could potentially keep offering until they get the best deal from the bank.

 

The buyer can drop out any time during the period while waiting for an answer from the bank.

 

 

The cons: 

 

It can take the bank months to get back with an answer on the accepted price.  All lenders on the property must agree and since the second holder may not get paid they may stop the sale.

 

The bank is the one who actually determines the sale price.  If the seller agrees to a price of $500,000 but the bank says they will only agree to $550,000 then the buyer either has to pay $550,000 or decline to purchase the property.

 

 

 

Foreclosure:

After a seller has stopped making payments for 3 months the bank can give a notice of default and start the foreclosure process which then takes up to 180 days, depending on the circumstances. California uses a deed of trust rather than a mortgage so at the end of the foreclosure process the trustee holds an auction on the courthouse steps.  At that time the buyer needs to have all cash and must totally pay off what is owed to the bank, taxes, and any second holders.  This rarely happens in this market as most foreclosures owe more than the properties are worth.  There is no title insurance on the foreclosure and you may find out that you have purchased a property with a huge second or third loan that needs to be paid off.

 

Bank Owned

 

If no one buys the property the bank gets ownership.  They then try to sell the property.  Occasionally they give the home to an auction house to auction off with other properties, but in this area most of those homes are cleaned up a little and sold thru realtors.

 

The Pros:

 

This is generally the place where you get the best deal.  Once the banks own the property they are highly motivated to sell and will often do so at deep discounts.

 

The Cons:

 

There are not that many bank owned properties compared to short sales, but the numbers are increasing

 

The sale is As-Is with no fixes done by the bank and generally no disclosures available.

 

 

Long time sellers

 

These are people who have owned their homes a long time and/or owe little or nothing on the property.  If motivated,  they are able to sell their homes for a very low price.

 

The pros:

 

Quicker turn around time and less hassles

 

The seller may do some repairs or give credit for repairs

Disclosures are available

 

Cons:

You never know what a seller will take until you ask so you may have to make a lot of unsuccessful offers till you get the price you want.

 

 

Posted by

Marcy Moyer eXp Realty of California  Specializing in Probate and Trust Sales, and Rental Investment Properties

 

Comments (2)

Jason Ellis
Coastal REO Solutions - Myrtle Beach Short Sales & REO's - Myrtle Beach, SC

great start to AR -- be careful it can become addictive -- good luck -- JE

Nov 29, 2008 11:59 PM
Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon
I always tell my buyers if you are looking for a great deal a distressed property is the way to go, but if you are looking to move next week, then don't even bother looking at a distressed property as you are looking at 120 minimum. Welcome to the rain and look forward to seeing around.
Nov 30, 2008 12:36 AM