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Short Sales How to Part 1

By
Real Estate Agent with Better Properties NW

Its' a complicated market they say.  I am writing this topic today to help buyers understand the difference between a regular sale and a "Short

Sale ". Also I will be covering bank owned properties, or REO as they're referred to in the trade which is short for Real Estate Owned.

 

What is a "Short Sale" ?  A Short Sale is a sale in which a seller owes more than what the home is worth to a lienholder and has negotiated with the lienholder to sell the home for less than what is owed.

 

Are "Short Sales" a good deal? Well, they certainly can be an great way to get into a home for usually far less than other homes that are being sold that are not under water. There are a few things to consider when purchasing a Short Sale. The first is Short Sales take much longer usually to close and negotiate than a standard sale.

 

Why do they take so long to negotiate? The reasons can vary but the number one issue is that when a property is listed on market the leinholder may not have approved the price, in otherwords a seller will place a property on market at a much lower price than what the leinholder will accept sign off on an offer then proceed to negotiate with them to accept it. This strategy can be very difficult for a buyer. The buyer makes an offer has it accepted by the seller then the offer is sent to a third party for approval. This can take weeks if not months sometimes, as the third party wants to see all offers and may not counter an offer or even dignify it if it is too low.

 

Some short sales have savy listing brokers or agents that have guided their client to get a preappoved price. These sales close typically on the same schedule as a standard sale 30-45 days on average if there are no serious conditions to hold up the negotiations.

 

 

REO's what are they? REO  Real Estate Owned or Bank Owned properties are just that, they have been foreclosed and are now owned by the lienholder. The lienholder in many of these cases wants these properties off their books and will sell them far below the market value. Some are sold without warranty to their condition so get an inspection and an appraisal if paying cash a bank usually will require an appraisal if they are loaning you the money for a mortgage. There is usually competition for the best properties and they may sell close to market price due to strong interest.

 

HUD, and FNMLC are Federal insurers who have foreclosed on properties in which they insured and may offer these properties for very little down along with special financing incentives to close to owner occupants. In these circumstances there is a bidding process for homes owned by these organizations and your Broker will need to have a code number and be HUD approved for a bid to be process on a HUD home.

 

Keep in mind that many bank owned properties and "Short Sales" are not the cream of the crop in the real estate market. Many of these properties are in need of extensive repairs and will require rehab loans to close or be cashed out as they cannot be financed in some cases.

 

Also in short sales a seller has a "Right of Redemption Period" if there financial picture changes and they want to keep their home by making up payments or renegotiating their loan. Buyers must be made aware that banks will not communicate this to the buyer causing the sale to fail because the bank will not accept the offer. This happens rarely but there is always a chance of it.

 

Another scenario in "Short Sales" is the property at risk of foreclosure and can be foreclosed if it goes beyond what the statutes allow in that state to prevent foreclosure. Once the timeline is met the leinholder can proceed with a foreclosure and the home becomes a bank owned property and the sale is void.

 

Many times, you can find a home in a traditional sale that is in excellent shape and in a prime location that has been overlooked because of the market saturation of Bank Owned and Short Sale properties, have your agent or broker show you all properties available in an area to get a good idea of value.

 

Author

Matthew Miller

is a Licensed Real Estate Broker in Washinton State

 

 

 

This information is deemed reliable but is not warranted reader should investigate to their own satisfaction.

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