If you are looking to buy in today’s real estate market, you are probably looking for a great deal. Distressed properties can be the route to go.
Short sales and foreclosures are both “distressed property” situations. They are hugely different from each other and it’s important to know the difference as one could work for you and the other may not.
In short: Foreclosures are properties that the bank has taken back. A foreclosure transaction can go smoothly and along a normal real estate transaction timeline. Short sales are being sold by the individual who owes more than they will get in the current market. They must ask the bank to forgive some of the loan. These listings can be good buys, but require a lot of patience on the buyer’s part as they take a very long time and often don’t make it to close.
Read on for more info on these two types of distressed property sales…
About Foreclosures
Foreclosures, also called “REO’s” or bank-owned properties are just that; they are properties that are owned by and being sold by banks. A property owner has gone into default on their home loan and the bank has repossessed the property. The bank lists the property for sale in the MLS.
The purchase of a foreclosure property is relatively straight forward. We see the property listed in the MLS. We view the property and if you like it, we make an offer. The bank responds hopefully positively and we go into escrow and close within a normal period of time.
Foreclosures can be good deals for investors and home buyers.
Note that banks are not required to make many disclosures that Sellers are normally obligated to make and it’s important as always to get a good physical inspection.
About Short Sales
When someone wants to sell their property, but owes more than the property is worth and isn’t able or willing to bring the extra money to close, a property is listed as a “short sale.”
These differ from foreclosures in that they are still owned by a person, not a bank. Short sales do sometimes close escrow, but it’s important to note that they also differ from foreclosures in that they often don’t result in closed escrows. (In 2008 only 24% of short sale escrows in San Diego actually closed.)
The snag with short sales is that the person who is listing the property, the Seller, is not the same person or party that decides if they will actually sell for the listed price. So the Seller lists for a low amount, below what they owe. After an offer is made, the bank sees the offer decides if they are willing to take less than they are owed.
As you can imagine, it can take a while to get a response from a bank, (sometimes one never comes.) There is often more than one bank involved and the approval must come from both banks. And sometimes even if you do go into escrow on a short sale property, the bank can change their mind along the way and pull out.
I steer most home buyers away from short sales. They usually take a very long time and often don’t close. This can be frustrating for most people. You may be a candidate for making offers on short sales if you are an investor with patience and are not emotionally tied to a quick or positive response.
I will be happy to send you a list of distressed properties. Just send me an email or give me call to let me know what areas fo San diego interest you.
