Welcome, please take some time to read and learn about these different types of sales.
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The lure of a bargain is irresistible. That's why home buyers are attracted to distress sales. However, with many websites listing so many properties that are not for sale or have sold, it can be difficult to know what's really out there. Then, once you do find a home that's available, getting a deal done can be a huge challenge.
Our property search is fed directly by the MLS, removing any chance for error or issue like you typically find on all the national search sites, and "special foreclosure" sites.
The first step to navigate distress sales is to understand the three types of home sales.
The value of the property is more than the total sum of the loans using that property as collateral (mortgages), so the seller is able to negotiate a deal with a buyer, payoff the mortgages, and convey clear title to the new owner at settlement.
The homeowner has title to the property, but the value of the home is less than the home mortgages. To deliver clear title at settlement/closing, the seller's bank(s) must agree to remove their liens and be paid 'short' of what's owed by the seller. These deals can take quite some time, many conversations and negotiations with the lienholders (banks) must take place.
In this case, the bank has taken the title from the homeowner through the foreclosure process. These are also called REOs (Real Estate Owned) and Bank Owned properties. To purchase a foreclosure, a home buyer negotiates directly with the bank, and the bank delivers clear title at settlement.
Nobody enjoys a short sale: not the buyer, not the seller, not the agent, not the negotiator - no one. Short sales are problematic because the servicer of the mortgage must review the seller's financial situation, evaluate the offered contract against the home's market value, and get investor approval to move forward. You would think banks would be super-efficient at processing a short sale by now, but they aren't usually. Documentation must be submitted, re-submitted again, and then again. They require special addenda from all parties, and then require it again. Banks will not accept electronic signatures often, so you're printing/signing/faxing/scanning over and over. The process can take months, and no one can tell you when a contract will be approved, rejected or countered. And after months of work, many contracts fall through.
With all that said, a buyer can get a great deal, so it's worth it, right? Sometimes, but not very often. Sellers don't make repairs, and banks often put the home's value at the top of the market, so they won't allow the home to be sold at a bargain price. A buyer should only consider a short sale if they have plenty of time and patience.
A foreclosure is the legal (and lengthy) process by which a lien-holder takes title from a homeowner(s). Once the bank takes title, they usually put the home on the market for sale. You (the buyer) submit an offer to the bank and negotiate directly with the bank, so it doesn't usually take months to receive a response. That's the good news….
What about the bad news? Brokers (and their agents) who typically represent banks are paid very little. They often manage a lot of properties, so don't expect quick turnaround on anything. Once an offer is submitted, it can be difficult to get a written and timely response as they must then move through the corporate web of the banks. Finally, when the bank does respond, they will send a stack of disclaimers, and probably spend some more time to find more disclaimers to sign.
Through all this…. you can get a great deal, right? No, not always. Most deals are just OK. If the home needs work, any savings are quickly offset by repairs. Every once in a while, you find a GEM of a property, and it’s a race to the offer table….where many buyers will show up…which typically will bring the final sales price back closer to market value.
Another frustration for buyers are foreclosure sites that list homes that are not available for purchase. If a homeowner is going through the foreclosure process, public notifications trigger entries on these sites. Consumers are led to believe these homes are available to purchase when they aren't. If a homeowner wants to sell, they will put it on the market as a short sale.
Of all the types of property deals, the best deals we've helped buyers get are regular sales. A highly-motivated homeowner, who has significant equity in a home, is the best opportunity to get the best price on the best home…..bar-none. You negotiate with one party and quickly get a deal done. Homes are in much better condition, and sellers will often make repairs for health, safety, and structural issues.
So, when looking for a bargain, look at all homes on the market. You never know where you'll find the next great deal.
Here's a list of today's newest foreclosures available for purchase.
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