There is a great deal of difference between a foreclosed home and a shortsale. Let’s start by saying that both these transactions involve the bank that held the mortgage on the home. However, a foreclosed home is actually Owned by the bank, whereas in a Short Sale, the transaction is still between the buyer and homeowner with the contingency of bank approval. Shortsales are by far the most difficult for a buyer to deal with (don’t do this without a Buyers Agent!), especially in the last 6 months or so. During the previous couple of years when shortsales were coming to the forefront during the mortgage meltdown, banks were giving huge discounts on homes being sold short, and buyers were reaping the benefits with sales prices up to 25% lower than market value. If you could wait the 4-6 months it took to process the shortsale, buyers could get a screamin’ deal.
Ah, but times have changed. Banks and mortgage insurance companies (who compensated banks up to a certain amount of their loss on a short sale or foreclosure) have pulled in the reins on distressed home sales to stop the bleeding, and are requiring prices closer to true market value. So, even if you make a lower offer, the bank is going to counter with an offer that is sometimes much higher than even the listing price.
The process of a short sale is still pretty much the same, the waiting time is still the same (although there is some indication that it could become shorter with new changes), but the deals are not as great as they once were.
Tip Here: Shortsales are not worth waiting for if you are not first offer. If there are multiple offers on the property and you are not first, the chances of you getting even Looked at by the bank will fit on the end of a pin. If you are looking at Shortsales, look for ones with no offers. Your Buyers Agent will do the research for you.
Bank owned homes, or REO’s (foreclosed homes) are actually the better deal right now. Once a home is foreclosed and the bank takes over, they will eventually put it back on the market at a reduced price. Foreclosed homes will usually begin at about 10% below market value. Banks don’t want to hang on to property they own, and the negotiator that is assigned the foreclosed home usually gets a bonus on what they get off the banks hands, so they are pretty motivated.
These are the real bargains in todays market, because the negotiators have a number that they have the authority to …well…negotiate without going through committee. The other great thing about foreclosed homes is that you can usually get an answer within a couple of days as opposed to the 4-6 months on a shortsale. Your Buyers Agent will know how to structure an offer that will get you the best price on the home, so…Use Them!
Foreclosed Homes and Shortsales are complicated transactions and can get you a great home, but will leave you with little hair in the process. Use a Buyers Agent to represent you…this is Always good advice on Any home you purchase, but is especially necessary when you are pursuing Foreclosed and Short sale homes, it will save you aggravation, it will save you time, and it will save you money. And the best part…it doesn’t cost you a thing! Call us today at 801.819.9005 or email us at firstname.lastname@example.org and we will help you through the most import purchase of your life…and guide you all the way home!
Til later, ciao!