Printer-Friendly
Email this Story
Post a Comment (0)
Don't confuse foreclosures and short sales
With home prices falling all over the country, including many parts of the Washington, D.C., metropolitan region, some overextended homeowners are being forced into “short sales” and foreclosures. This situation has created opportunities for buyers looking for bargains. But not all bargains are created equal.There are two main types of distressed residential property sales: short sales and REOs. REO stands for “Real Estate Owned,” which is a fancy way of saying the bank owns the property.
A short sale occurs when a homeowner has to sell his or her home for less than what is owed to the bank. This can occur when housing prices drop and the owner doesn’t have much (or any) equity. In such cases, instead of making a profit when the house is sold, the owner has to pay additional cash at settlement to pay off the mortgage – in essence, the seller is “short” of the funds needed to sell.
But short sales are anything but short from a timing perspective. As a bargain-hunting buyer, you’re much better off focusing your efforts on foreclosures (REOs), because banks want to sell those properties as soon as possible and typically respond quickly to all offers.
In contrast, making an offer on a short-sale home can be problematic and time-consuming. One danger is that the owner’s bank may foreclose on the property while you have an offer pending, thus voiding your offer.
Another problem is that the bank must approve the offer before it can be ratified – a process that can take weeks to months. Why does it take so long? When there is more than one mortgage on the property, the banks must negotiate the loss – and each wants the other to take the bigger hit.
The seller often tries to get the bank to forgive part of the mortgage debt in a short sale transaction. But proving hardship is a long, complicated process. The bank, for example, may force the seller to divest assets, or might even sue the seller for providing false information in the original mortgage application.
For all these reasons, it’s much quicker, easier and less complicated to purchase an REO property than a short-sale property. To learn more about this topic, visit www.DROdio.com/auctions. You can also search foreclosures on our Web site, www.TheBestForeclosureSearchEver.com.
Daniel R. Odio is the owner and principal broker of DROdio Real Estate Inc. (www.DROdio.com). He is licensed in Virginia, Maryland, Washington, D.C., and Nevada.
You must be logged in to post a comment.