There isn't a day that goes by that I'm not on the phone talking to clients about Short Sales.  Today's buyers spend a lot of time on the internet looking at cabins for sale in the Big Bear area before they ever come up and look around.  Between the bank owned, REO properties and the Short Sales, the buyers are seeing some very attractive prices.  One question that is asked more and more is what a Short sale is, and how is it different from a bank owned property?

Because I'm asked that question so often, I thought it would be good to take a look at the differences between the REO property and the Short Sale. 

 What Is An REO Property?

REO stands for Real Estate Owned or simply put, a bank owned property.  The banks have been overwhelmed with foreclosures and have become the owner of a lot of properties.  When they get these properties back, they want to sell them as quickly as possible.  When you look at the bank owned property inventory, you will undoubtedly see some very attractive prices.  Some of these homes are in move in condition and others are going to need a tremendous amount of work before you can use them,

What to Expect If You Make an Offer on A REO Property?

Making an offer on a home that is owned by the bank is no different than making an offer on a home that is privately owned.  However, the response you get from a private seller is going to be much different than you're going to see from a bank.   I don't care if you offered the bank what they were asking for; you are still going to get an addendum from the bank.  This addendum is much like a counter offer that you would  get if you were buying a cabin from a private buyer.  This addendum is going to spell out what they will agree to and what they won't do.  Termite work is normally rejected by the banks.  They will usually pay for the Termite Report, but generally they won't do any of the Termite work.  When you buy a cabin that is owned by a private party, you normally ask for and receive a one year home warranty.  That won't happen with the banks.  I've yet to see a bank pay for the home warranty.  Along with a list of things the bank won't pay for, the banks like to shorten the inspection and loan time frames.  Normally, a buyer is given 17 days to do his inspections and to get his loan in order.  He is asked to sign off the loan contingencies at the end of the 17 day time frame.  Banks, on the other hand will give you 5 to possibly 10 days to do all of your inspections and to get the loan in place.  I have seen banks word the addendum in such a way that the contingencies are automatically waived if nothing is said within the time allotted.   

If you are going to buy a bank owned property, I strongly recommend that you use the services of a qualified Realtor who specializes in this area.  I also recommend that you take the time to read and understand the addendum that the bank sends over.  Don't be afraid to ask your Realtor questions if you don't understand what the bank is doing.  Make sure that you understand all of the terms of the contract before you sign off on it. 

What Is A Short Sale?

Simply put, a Short Sale is a situation where a home owner is selling his home for less than he owes the bank.  Even in the best of circumstances, a short sale can be a long and difficult process. If the buyer has a lot of patients and doesn't mind the wait, he stands to walk away with a good deal on a cabin.  The flip side to that is while the buyer sits and waits, he or she can be passing up some great deals that come up on the market.

As an example of what I'm talking about, I will run down the highlights of a Short Sale escrow that I closed recently.  My buyer fell in love with this property in Big Bear Lake and had to have it.  I explained to her that it was a Short Sale and if she was serious about buying the home, she will be in for a long haul.  Needless to say, she just had to have this property. 

In speaking to the listing agent I was informed that there was a First, Second, and Third mortgage on the property.  Fannie Mae held the first; a local bank held the second and the third was private money.  The biggest obstacle we had with this escrow was that there was enough money coming in from the offer to satisfy the first and second mortgage, but the guy holding the third mortgage was out of luck.  He wasn't going to let this escrow close unless he got something out of the deal.  Fortunately, the bank holding the second was getting enough money back that they were happy to pay the guy holding the third off  This escrow took three and a half months to work and when it was all said and done, the buyer got the home that she so desperately wanted.  But, in those three and a half months, there were many ups and downs along the way.

If you are going to buy a home in Big Bear that is being offered for sale as a Short Sale, you want to make sure that you have an experienced Realtor like me working for you.