As of late, I have recieved more phone calls and email about Short Sale and REO (Bank-Owned) properties than anything else.
The reason is simple: Buyers are keenly aware that the tide has turned in their favor, and they want to find the best possible deal out there.
Here in Seattle we have really caught the tail end of the housing market decline, and all indications are that we will not suffer as much as much of the rest of the nation in regards to our housing prices. (See my last post)
Because of this, the amount of Short Sale and REO properties are not as great as areas in California and Florida that have been waylaid by the bust.
That being said, these types of properties are out there, and the potential to get a better-than-retail price is very good.
Here is a quick explanation of the basic differences between the two types of sales, and why I feel REO's are not only preferrrable to deal with, but why the potential for nabbing a "deal" is greater. And why REO properties thankfully have nothing to do with the 80's band that sang "I can't fight this feeling anymore".
The difference between REO and Short Sale Properties:
Short Sale Properties:
1. Not owned by the bank…yet. The owner owes more than they can sell the property for, so any offers submitted need to be approved by the bank
2. The owner may or may not be behind on his/her payments. Whether they are or not may influence the bank to accept offers
3. A listing agent is not required to disclose whether or not the seller is behind on their payments
4. Banks are usually less than responsive, as the amount of short sale files they are dealing with is large, and the approval process has to move through several layers of bureaucracy
5. Because the bank does not own the property yet, their motivation is usually not as strong to move quickly, as it may be with an REO property
6. It can take up to 2 months for the bank to approve the sale (!)
7. Closing on a short sale can be an exceptionally long period of time, sometimes up to 6 months
REO Properties:
1. These are properties that have gone through the foreclosure process, and have been auctioned off at a Trustee Sale (auction)
2. The bank now owns the property because no one bid on the property at the Trustee Sale and it reverted back to the bank
3. The main reason a property is not bid on at the Trustee Sale is because the opening bid was too high for a purchase to make any sense. Usually, the owners owed more than the property was worth, so there was no equity to be found
4. Because the bank now owns the property, the motivation to sell the property is much greater than a Short Sale Listing. They need to move the property off of their books, so that they are able to loan more money. Plus, they have spent much money on the foreclosure process and now own a “non-performing asset”. In other words, it is not producing any income for the bank.
5. Because of the increased motivation on the bank’s part, offers are usually accepted quickly, often within 24 hours.
6. Though these properties are usually sold “As-Is” there is greater potential to negotiate a lower price, (and possibly some closing costs) than a short sale for the reasons mentioned above
7. Because of the increased responsiveness of the bank, closing time is much closer to a standard sale
As always, if you have any additional questions, feel free to give me a call at 206.245.4164
My best,
Lake Forest Mark
