At both the National level, and here in Punta Gorda, Florida at the local level, Buyers are coming in droves to take advantage of the affordability of Short Sale or Bank-Owned Properties. Indeed it’s a great time to buy in Punta Gorda! Many buyers, however, don’t really know or understand the difference between the two. They are very different, and not knowing what those differences are can cause much heartache and frustration on the part of prospective Buyers without some professional guidance through the maze.
In the simplest of terms, one (the REO) has been completely foreclosed on, and the other (the Short Sale) hasn’t.
A “Short Sale” is a property that is not owned by the bank. It is owned by a real live Seller, who unfortunately now owns a home that has less sales value than the mortgage that is owed on it. Typically, nobody is happy about it. The bank does not own the property, but it must approve the sale as the lender holding the mortgage because there will not be enough money to pay the mortgage when it sells. It may even have more than one mortgage on it. That can really make it even more difficult to navigate through to a successful sale. You are going to need help.
In a Short Sale, you are initially making an offer on the property with the current Seller. That offer, however is contingent upon the lender approving it. The lender is not a party to the contract but, in reality, like it or not, is in the driver’s seat if the end result of the sale is to successfully close. The lender is under no obligation to approve the offer, and that is the rub! Sometimes they will and sometimes they won’t. Boom! That’s it! It is also going to take you valuable time and effort to find out one way or the other. You are dealing with committees, computer portals, loss mitigation departments, and a bureaucratic banking system bordering on chaos. Yet, successful short sales do happen every day! Knowing that is important don’t you think?
If you have time, patience, money, and are not in a rush or in need of a roof over your head immediately a short sale can be a very good way to get a property at a bargain, and prevent a foreclosure in the process. It won’t be easy. It can, however, be a win for you, a win for the buyer, and yes, even a win for the bank in some cases, but you better have a good, knowledgeable real estate agent involved in the process and be prepared to have your blood pressure medication handy on occasion! It’s going to be a roller coaster ride, but roller coasters are fun for some folks! If you didn’t enjoy roller coasters as a kid, perhaps you should look in a different direction than a short sale.
An “REO” (Real Estate Owned) Property is simply a Bank-Owned property. The bank is the direct Seller. The property has been through the foreclosure process. The decision maker is right there. Buying a bank-owned property successfully will go much more quickly than navigating through the short sale process, but, hold on…don’t think, just because it is bank-owned it will be so easy you don’t need a real estate agent, or that you will be getting your dream home at rock-bottom prices. It can be a very competitive multiple offer process here in the Punta Gorda/Port Charlotte area. Additionally, you can be buying a property that has been empty and neglected for a while as the foreclosure process was taking place. Just the fact that bank owns it now, doesn’t mean they lovingly cared for it with pride of ownership like the families that lived in it before the foreclosure. Once again, you will need the help of a good, knowledgeable real estate agent.
In both Short Sales and REO Sales, CASH IS KING! If you have to borrow money or get a new mortgage things just got a lot more difficult and you have been moved down the list for a quick approval. It isn’t an impossible task, but the “probability” of a successful result drops a bit. You will be at the mercy of an Appraiser, who is very often stuck with distress properties to use as comparisons. That makes it even more important to have a good real estate professional, a good, knowledgeable lender, and a Home Inspection service.
In short, (no pun intended)…if you are not in a hurry a Short sale can be a good way to get a bargain. If you need a quicker result, an REO can be better for you. Neither of them will be a walk in the park!
Don’t, in your zest to find a bargain, however, eliminate the normal Seller who is not upside down on their mortgage and has priced their property to be competitive in the marketplace. Sometimes that is just flat out the best way to go!
That’s where we all were before all these dilemmas came to fruition. Isn’t that where we would all like to be again? If you are ready to buy… Come on down!