There’s been a lot of talk about distressed properties in the news. Are these deals too good to be true?
We are seeing more distressed property sales, as just mentioned. Short sale and REO properties account for one-fourth to one-half of our current market activity.
Describe Short Sale and REO Properties. What are they?
A Short Sale is just what it sounds like – shorting the bank. This means a seller owes more on the house than it can sell for. In a short sale, the seller must negotiate with the bank and get them to accept less money than what is owed. Not all banks will do this, but some will work with sellers to avoid the added expense of the foreclosure process.
REO properties, on the other hand, have already gone through the foreclosure process, unsuccessfully, and are now owned by the banks. REO stands for “Real Estate Owned,” and are also known as Bank Owned properties.
Both Short Sales properties and REO properties are typically priced right at (or just below) market value. These folks are motivated to sell, and buyers can get some good deals if they come to the table prepared.
What should buyers need to know?
Short sale properties have a reputation for taking a long time to close. If a buyer makes an offer on a short sale, banks can take months to respond. And if this weren’t bad enough, a bank will also solicit other offers right up to the day of closing. So buyers need to anticipate a long closing time when making an offer on a short sale property.
In the case of the REO, or bank owned homes, buyers need to understand the original seller is completely out of the picture and moved out. In this case you have a financial institution selling a house they know nothing about. So there is no property disclosure and while the buyer can (and should) have an inspection, you are most likely buying it “as is.” Another pitfall in both cases is that once a closing date is agreed upon the buyer is held responsible for that date, and charged a per diem penalty should they delay the closing.
There are some great deals on the market today if you know what to look for and have someone to help you navigate the nuances of a distressed property transaction. Buyers should give me a call or email me and set up a time to discuss. Its not as tough as it sounds, you just need to be prepared.
