In this market, everybody is looking for better deal but which one is a better buy? Is it short sale or REO? When different types of homes are available, it’s better to educate yourself as a home buyer with these types of homes.
In my close by east bay area office (Fremont, Newark, Union City & Hayward), as of today (11/10/09), there are 666 homes are available for sale, out of 223 homes are short sale, 110 homes are REO and 333 homes are regular sale. So, you can see that short sale homes are available more than REO and I’m sure some of the homes under regular sale are also candidate for short sale but the owners/agents are trying to sell as regular (35% of regular home sales are on market for more than 2 months with no offers because of higher list price).
Well, all these types of homes have their own advantage and disadvantages, you have to select which suits best your needs and budget. Here are some of the important things to know:
REO Homes:
Price is the one of the biggest attraction factor, most of the bank owned homes list at way lower than the market price to attract multiple offers. Most of the buyers think that bank owned homes are available at cheaper price but due to multiple offers, it sells at higher price and most of the time it sells at market price. But if you are cash buyers then you can negotiate a cheaper deal.
Condition: It’s always “As-Is” sale, that means the bank will not fix any repairs if there’s any problem. You have to be careful before you buy, do your inspection before removing any conditions, some of the REO homes are really in bad condition due to vacant for long time before it list by the bank and sometime the previous owner had already took out all the appliances, holes in wall and not well maintained.
Time: You can get the ratified contract from bank in a week or so and closing is as normal as other sales.
So, if you are a cash buyer and can fix small things by your own then you can get a good deal in REO homes.
Short Sales Homes:
Price is one of the attraction in short sale also, the owner wants to sell it and avoid foreclosure, the bank also wants to sell it to avoid additional cost of foreclosure and the buyer also gets at bargain price, so its win-win situation for everybody. In short sale, bank looks at their net profit, how much they can get from this sale and if their investor is satisfied with the net profit and seller is ok with the banks approval(if there’s no unusual terms & conditions), then the buyer can get a good deal.
Condition: it will be As-Is sale, that means neither seller nor bank will fix any repairs if there’s any, but most of the homes are in better condition because owners are still there and they maintain they property. Well, you can see some of the homes are vacant also, where you may find, it is not maintained like cleaning, landscaping, pool(if any) and other common things, but still the condition is better than REO homes.
Time: This is where most of the home buyers get frustrated because sometimes it takes 2-3 months and if the listing agent is not experienced in short sale then it may take more than 6 months also with no answer from bank after they submit the offer. This is one of the biggest reasons why home owners should work with an experienced short sale agent.
So, even if you are not cash buyer, you can still bid for short sale homes but needs little bit patience to wait for the approval from lender to get your dream home.
I hope this will give you some ideas on what to look for on these REO or short sale homes. If you have any questions, please don’t hesitate contact me at 510-366-9405. Thanks for reading! Have a great day!
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