Short Sales and REO's, what are they?

Buying a home which is a "Short Sale" or buying a home which is a "REO"'

What is a short sale and what is a reo? These are two types of property for sale which are considered distressed property sales. A buyer might find a home for sale which falls into one of these categories and think a simple offer will get things started toward a closing. There are things a buyer needs to be aware of when it comes to purchasing a distressed property.

With a short sale the offer is presented to the owner who might still be occupying the property. Once the seller accepts the offer then the offer is presented to the bank holding the note which has a balance more than what the offer is. There are certain requirements which the bank will need to have before it considers looking at an offer. It is because of this, one should have an agent who is aware of the needs to get a property in a short sale to the closing table in a smooth transition. One of the most important items will be a letter stating the buyer will have the financing available in order to close. The regular offer is submitted along with an addendum stating the buyer is aware of some of the needs for receiving an approval from a bank. It is most important to the buyer to understand there might not be an answer on the offer for more than 60 days from the effective date of the offer.

A short sale might be a great way to get into a property without paying a high price, but it will take time. The more contingencies a buyer might place on a bank in order to buy the property can have a negative effect on a banks' acceptance of an offer.

A REO is a different type of purchase. These are bank owned properties in pre- foreclosure status. The bank owns the property and the original owner has left the property. The property is either rented or vacant. The listing agent will act as the seller for the bank and be responsible to keep the bank or asset management company apprised of the property's condition. The agent will be responsible for filing reports to the company on a regular basis, for covering utility bills, maintenance of the grounds and other needs which might come up during the time of the listing.

A buyer might place an offer on a REO listing and will need certain information for the bank in order for it to accept it. The bank will need a letter from the financial institution which will be giving the loan to purchase the property for the buyer. This letter should state the funds will be available to the buyer for this property as long as the property appraisal come within a certain percentage of the mortgage offered. Once the offer is accepted then the closing date will be set and the place of closing, who will perform the closing, the address and contact names and numbers will have to be filed with the selling bank. It is important the agent is aware of what is needed to get the home from the offer to closing in the most timely fashion. It should be made aware to the buyer if for whatever reason the closing date isn't met there might be a fee for every day the property doesn't close. The selling agent should request extensions to the closing when necessary.

The purchasing of the REO can get the buyer into more house at a lower fee. There are times where the bank might make improvements if there is a legal reason for it not being able to have a mortgage on it, other wise it is sold "as is".

"AS IS"