DISTRESSED HOME SALES
SHORT SALE PROPERTIES
WHAT IS A SHORT SALE? – A SHORT SALE OCCURS WHEN THE SELLER OWES MORE THAN THE PROPERTY IS WORTH AND THE BANK AGREES TO ACCEPT WHAT THE SELLER CAN GET IN TODAY’S MARKETSHORT SALE PROPERTIES
THE LIST PRICE MAY OR MAY NOT BE APPROVED BY THE BANK – IT USUALLY IS NOT
THERE MAY BE A FIRST LOAN, A SECOND LOAN, HOME EQUITY LINE OF CREDIT, BACK PROPERTY TAXES, HOA DUES OR OTHER LIENS ON THE PROPERTY.
BUYER BENEFITS –
1) CAN GET A BETTER PRICE FOR A SHORT SALE, POSSIBLY BELOW MARKET VALUE, BUT NOT ALWAYS
BUYERS DISADVANTAGES –
1) IT CAN TAKE 4-12 MONTHS FOR SHORT SALE APPROVAL (TYPICALLY 3-6 DEPENDING ON THE BANK)
2) THERE’S NO GUARANTEE THE BANK WILL ACCEPT A SHORT SALE- BUYERS MAY LOSE MONEY SPENT ON INSPECTIONS/APPRAISAL.
3) BANK MAY ASK THE BUYER FOR MORE MONEY
4) BANK MAY NOT PAY FOR A TERMITE INSPECTION, HOME WARRENTY OR GIVE ANY CREDITS FOR REPAIRS
5) SELLER’S AGENT MAY REQUIRE THAT YOU PUT A DEPOSIT IN ESCROW – TYING UP FUNDS FOR SEVERAL MONTHS
6) BUYER MAY BE ASKED TO COME UP WITH MORE CASH FOR THE 2ND LEIN HOLDER
DISTRESSED HOME SALES
REO PROPERTIES
WHAT IS AN REO?- REO STANDS FOR “REAL ESTATE OWNED” – WHICH IS OWNED BY A BANK WHO FORCLOSED ON THE OWNERS
BENEFITS TO BUYERS-
1) CAN GET A BETTER PRICE FOR A REO, USUALLY BELOW MARKET VALUE, BUT NOT ALWAYS
2) WHEN THE BANK HAS AN REO PROPERTY, THEY LIKE TO CLOSE QUICKLY BECAUSE IT’S COSTING THEM MONEY TO HOLD THE PROPERTY
BUYERS DISADVANTAGES –
1) BANKS WILL NOT WORK WITH BUYERS WHO HAVE FHA LOANS OR DOWN PAYMENTS BELOW 20%
2) BECAUSE PROPERTIES ARE OFTEN LISTED BELOW MARKET VALUE, THERE IS A LOT OF COMPETITION FROM INVESTORS WHO CAN PAY ALL CASH, AND HAVE NO LOAN OR APPRAISAL CONTINGENCY AND CAN CLOSE FASTER THAN SOMEONE WITH A LOAN
3) REO PROPERTIES OFTEN NEED A LOT OF WORK OR HAVE OTHER PROBLEMS
4) BANK MAY NOT PAY FOR A TERMITE INSPECTION, HOME WARRANTY OR GIVE ANY CREDITS FOR REPAIRS
