Foreclosures and Short Sale Properties: Opportunity or Potential Nightmare?
In these challenging economic times, local Realtors are seeing more of these types of properties than has been seen in the past. But can one’s loss be another’s gain? Buyers: know the facts so you can decide if these properties can be an opportunity or a potential nightmare.
Foreclosure and short sale transactions both represent a distressed sale. In both instances, the homeowner typically owes more than the property is worth. Also in both instances, the homeowner generally relinquishes control over the sale of the property to the lender. However, these types of transactions have important differences.
Foreclosures – a Brief Overview
On the other hand, bank-owned, sometimes called real estate owned (REO) properties have already been foreclosed on, so the bank is now the owner/seller. To recoup some of the money owed, the bank will attempt to sell the property for fair market value.
Short Sales – a Brief Overview
A short sale is the process the homeowner attempts to go through to prevent foreclosure. In this situation, the homeowner asks the lender to forgive the debt and to sell the property for less than what is owed. The sale typically must be approved by the lender, which is why you will often see the phrase "subject to 3rd party approval" in the listing.
What You Need to Know
When considering the purchase of either of these types of properties, buyers should be aware of a few things. First, because the bank is generally the primary decision-maker regarding acceptance of offers, the transaction process on either of these property types can be very long. In fact, some banks are taking as long as 4 to 6 weeks just to respond to offers. Second, these properties are generally sold as-is so buyers need to do their homework to make sure they’re not purchasing more than they can handle. Finally, remember that banks generally owe it to their investors to recoup as much of the investment value as is possible from these types of properties. Interested buyers should prepare and submit their best offer when settling on a specific property.
For more specific information on these types of properties, contact a local Realtor.
