As a First Time Home Buyer Specialist, I often have to start educating my clients early-on about what a "short sale" is, and how it is different than a "foreclosure." We talk about "regular, more traditional" sales and how each offer needs to be tailored to each property, depending on the type of sale.
-Traditional Sales-
*Referred to as Regular or Non-Distress sales.
*ALL terms are negotiable, unless otherwise directed
*These homes are usually being lived in by the Owner or a Tenant
*Super easy to work with. Can usually close within 30 days.
*Caution: Seller may need to buy new home before closing on existing home. You will know right away if this is the case via counter offer, MLS Info or the agent.
-Bank Owned Property-
*Often called REO or Foreclosure property
*The Lender owns the property and they are required to transfer clear title (NO LIENS)
*Once the property has reverted back to the bank, the price is at it's lowest!
*Banks will not counter offer, They accept the highest and best offer submitted (there can be up to 20 or 50)
*Banks are easy to work with and usually respond to your offer within 24-72 hours. The longest response time I have seen was a week. (not the case when dealing with a short sale.)
*Banks can close in 30-45 days (not usually the case when dealing with a short sale.)
*Banks will usually give the buyer closing cost assistance and usually always perform all termite damage repairs.
*Always Vacant
-Short Sale-
*Also called a Pre-Foreclosure or Short Pay
*The Owner of the property is trying to sell the property for less than what the owner owe's the bank on the existing mortgage(s)
*Often there are 2 lenders who need to agree to the short sale. (95% of short sale's that don't go through are because the 1st lender will only allow the 2nd lender to get $1,000 - and usually the second lender doesn't agree to these terms.) TRY to make offers on homes with 1 lender - you will have a better shot at a successful short sale.
*Seller may not be transferring Clear Title, due to the fact that they are in distress and often months behind on payments, Sometimes Liens appear on the title month after sale from debt that the original owner may have had with someone else. The paperwork takes time to process and sometimes liens pop up later that you may need to take to court and deal with.
*Often times (since the seller is in a distressed situation or facing a hardship like job loss, medical bills, or divorce etc.) the buyer has to bring additional funds into escrow to close the property. I have seen a short sale get down to the last few days in escrow, and the appraisal comes back high-right before closing, and so the price of the house has to be raised to meet the appraisal value. Since the sellers have no money, the buyer was asked to come up with an additional $6,000 within the week. Needless to say the deal was cancelled. I have seen this happen with Past Due H.O.A. Fee's as well.
*If in fact a short sale does work out you can get a really good deal, (but if the same house foreclosed you will get the best deal)
*Although the seller of a short sale has accepted your offer, they have to submit it to the bank and you may have to wait 1,2,3 or even 9 months for a response from the bank about whether or not they will accept a short sale on the property.
*Once escrow is opened you will need 45-90 days to close it. Short sales are never guaranteed to close (- So what happens if you have given your landlord your 30 day notice??)
*Short Sales have NO Closing costs credited to the buyer
*Short Sales have NO repairs done to satisfy Buyer regardless of what the Inspector says about the condition of the property.
*A common problem with short sales is the buyer losing out on money paying an inspector up to $450 to inspect a property that they will never own.
* Often times the homeowner is living in the property, or is renting it out. What kind of condition do you think they will leave it in??
If You or someone you know would like to talk about buying you first home, Give me a call and I will help you through each step. Call 619-850-4174 and ask for Barbara.
"Making Real Estate Simple!"
Barbara Ann Wibe, e-PRO REALTOR
Cell: 619.850.4174 e-Fax: 619.512.5156
Coldwell Banker Nautilus Real Estate
7061 Clairemont Mesa Blvd. Suite 218
San Diego Ca 92111 Lic. #01742839
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