Answers to your burning questions

| Friday, November 26th, 2010 | 2 Comments »

Ok, maybe “burning questions” is a bit of an overstatement but I do find that there are a lot of real estate questions my clients have that they are either too embarrassed to ask or think they know but don’t.

Probably the most common question I get asked is “What is a short sale?” According to Wikipedia, a short sale is defined as a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. In other words, a homeowner needs to sell their home but can’t sell it for a price that’s equal to or more than what they owe, thus falling “short” to the bank. When a buyer makes an offer on a short sale, they are not negotiating with the homeowner but rather the bank or banks that hold the loan on the property. It can be a lengthy process, especially when there is more than one loan on the property. However, I have been a part of short sale transactions that have closed in less than 45 days.

Then there’s the ever popular question: “What’s the difference between a short sale, foreclosure and a bank owned home?” Well now you are all clear on short sales so let’s talk about foreclosure. Foreclosure is more of a process than an end result. It’s the process that the bank goes through once the borrower fails to continue making payments on their mortgage. Eventually, the home is “foreclosed” on and the borrowers are evicted. A bank owned home (also known as REO–real estate owned) is a home that’s been through the foreclosure process and bought by the bank at an auction; it is owned free and clear by the bank. They have then chosen an agent to help them sell it. Buying a bank owned home is usually a much easier process than buying a short sale.

Another common question people have is “What is earnest money?” followed by “Is it the down payment?” Earnest money is a term that most buyers have heard but are unclear what it means. Earnest money is not the down payment. It is a portion of money that a buyer puts up front as a good faith effort that they are going to do everything they can to purchase the house. Without earnest money, a seller has no idea that you are actually serious enough to go through with the purchase. Earnest money is expected to be presented at the time of the offer which sometimes catches buyers off guard. Writing a check for (quite possibly) thousands of dollars with no guarantee that your offer will be accepted is often a hard pill to swallow. But rest assured there are plenty of ways to get the money back and if the house sells, the money is applied to the remaining portion of the buyer’s closing costs.

What is the difference between the listing agent (seller’s agent) and selling agent (buyer’s agent)? The listing agent represents the seller; they are the agent that has the home listed for sale. The selling agent represents the buyer; they are the agent that brings a buyer to the home that’s for sale. If you are a buyer, it is not considered good practice to call the listing agent to see the home. You should direct all showings and questions to your agent.

Ok, I think I’ve covered the most common questions I get asked. If I’ve missed any or there’s a question you’ve been dying to ask, let’s hear it!

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  1. Janice says:

    Just wanted to tell you that I passed this post along to a friend tonight because she wanted to know the difference between a foreclosure and bank owned property. This is the second time that I’ve referenced one of your immediate posts in a conversation (and I have nothing to do with real estate) because they are timely. Claps for you!

  2. Hannah says:

    Thanks for the simple-speak, I appreciate that.

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