Short Sale And Bank-Owned Property Information
If you are in the market for a home, you may have heard the terms “Short Sales” and “Bank-Owned Homes”. Navigating these terms can be tricky, and understanding the advantages as well as the disadvantages to buying such properties, is the key to making a wise decision.
Let’s start with Short Sale properties. Short Sales have become more common as foreclosure rates have escalated. A Short Sale occurs when a property owner makes an arrangement with their mortgage lender to accept a price that is less than the amount they still owe on their property.
By accepting this proposal, the mortgage lender is essentially saying that a moderate loss on the property is better than it going into foreclosure. The lender will then try to sell off the property and use the money received from a short sale to hopefully cover the residual mortgage amount.
When buying a short sale property, there can be some potential stumbling blocks. The mortgage lender or bank lender who holds the mortgage has to agree to all the specific terms and conditions of each short sale. If a short sale listing hasn’t been pre-approved by the lender, offers on the property may take months to review and/or approve due to a backlog of paperwork.
As a buyer, you should be prepared to wait since the process tends to be lengthy. You should know that while your offer is in the lender’s possession, the lender could continue to accept other buyers’ offers for as long as they wish. Buyers who are patient, and choose to wait out the sometimes-grueling process, may end up with a great deal on a property.
Bank Owned Property
Bank owned properties are defined as foreclosed homes and REO Properties. An REO property is simply a Real Estate Owned property, meaning it is back in the hands of the mortgage lender after undergoing an unsuccessful foreclosure auction. A foreclosed property is one that has been repossessed by the lender because the property owner could not make mortgage payments.
The prices and terms of these often discounted properties have already been decided, giving banks the freedom to accept reasonable offers in a timely manner. These properties are often sold in “as is” condition therefore the turnaround for offer acceptance or refusal is much quicker.
In the past six months, area banks have aggressively listed their properties to promote quick resales. Home values between $200,000 and $500,000 have been the most popular price bracket, garnering 82% of total bank-owned sales. These properties have sold for 97% to 98.7% of banks’ asking prices across the Coachella Valley. This high percentage of sold homes indicates that the purchased homes and condos were listed well below market values.
This situation creates exciting real estate opportunities in our area. If you are interested in a short sale or bank-owned property, or have any questions, please contact me for more information.