Buyers--> Foreclosure vs Short Sale

I was councilling a client today and wanted to post a blog to review the differences between the two WHEN YOU ARE THE BUYER:

-Bank Owned Property-

*Often called REO or Foreclosure property

*The Lender owns the property (duh =) 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.

*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 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.

-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.

*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 2-9 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.

If you are searching for a home and would like a daily list of what is going on in your market excluding all the short sales, please send me an email at barbarainc@gmail.com

"Making Real Estate Simple!"

Barbara Ann Wibe, e-PRO, REALTOR
Cell: 619.850.4174 e-Fax: 619.512.5156

www.MyRealtorBarbie.com
Barbarainc@gmail.com

Coldwell Banker Nautilus
9535 Mission Gorge Rd #E
Santee, Ca 92071