And in this corner…Cara Erdman | Thursday, June 7th, 2012 | No Comments »
Appearing in today’s real estate ring we have two opponents: short sales and bank owned homes. Who wins the battle of being the most difficult? Let’s take a look at their scorecards.
In one corner we have bank owned homes (aka “foreclosures” or REO). Most think of them as unsightly homes with weeds growing and appliances missing who drag down values in otherwise nice neighborhoods. And that can be true but here are some positives about bank owned homes from the perspective of a buyer. For one, the price it’s listed at can often be the sales price or perhaps there can still be room to negotiate. There should never be a reason for a bank to counter an offer with a higher-than-asking price. They have also relied on a broker or appraiser to help determine the price so most are priced appropriately.
Secondly, the house is vacant which makes showing the home easy and when you make an offer on a bank owned home you are not dealing with an actual seller who has personal ties to the property or any pride of ownership whatsoever. You are dealing with a very large corporation that simply has a fiduciary (look at me with the big word!!) responsibility to sell off this property. And once there is an offer on a bank owned home it could typically close as fast as the buyer can get their financing secured. If it’s a cash offer it can close in a matter of days or weeks.
But let’s take off our rose-colored glasses and look at the downside. Most are sold “as-is” meaning any repairs or items that come up during an inspection are the buyers’ problem. There is also no seller disclosure statement (or Form 17 for those of you in “the know”) so the bank has no knowledge of any past or current problems with the home nor are they required to care.
I give bank owned homes a 7 out of 10 as far as being an easy transaction for a buyer.
In the other corner we have the dreaded short sale. Us corny brokers like to say, “they are not short and not always sales.” (insert fake laugh here)
Short sales are getting easier and more efficient but they are not without many faults. First, the owner is potentially still living in the home and is most likely in a distressed situation which could make viewing the home difficult. The short sale process relies VERY HEAVILY on paperwork from the seller and not every seller is organized and able to provide what is needed in a timely manner let alone locate whatever it is the bank is looking for. Keep in mind they may be living in the home free of charge because they’ve stopped making the mortgage payment so there may be very little motivation to move the process along.
Pricing is tricky as most are priced extremely low just to attract offers and not necessarily priced fairly. There is definitely potential for the bank to counter an offer with a higher-than-asking price. And let me tell you, that is the last thing a buyer wants to hear! They also take FOREVER. There are so many people involved and departments and extensions and negotiators and escrow professionals and real estate brokers and antsy buyers and angry sellers who ALL have to pull their weight and it can sometimes be very, very difficult on everyone. The good news is that you at least have a seller who knows the history of the home but just like a bank owned home, they are often sold as-is leaving the repairs up to the buyer.
I give short sales a 4 out of 10 as far as being an easy transaction for a buyer (this doesn’t mean there aren’t easier ones out there…I’ve done some that were an 8!)
And the winner is…bank owned homes. And just FYI we do not call them foreclosures. That refers to the legal process of the bank taking the home back; they are bank owned or REO (real estate owned).
Whatever corner you’re in or even if you aren’t sure, I can guide you through both processes and the only winner will be you!