short sale home buying
The critical difference is that a pre-foreclosure, commonly called a short sale, is still owned by the private individual. It has not been through the foreclosure process yet. The bank hasn’t actually taken the property back from the owner and put the bank’s name on the title in public record.
A foreclosure is also commonly referred to as an REO, or “Real Estate Owned” by the bank. The banks typically will not take offers directly from the general public on foreclosure homes, because of liability and disclosure concerns. They prefer to have foreclosure homes sold through local real estate agents.
Banks consider foreclosure homes they own as “non-performing assets”. Therefore, they are very eager to get them off their books as quickly as possible. Banks usually respond to offers submitted by your real estate agent within a few days.
All bank owned foreclosures are sold “as-is”, however, buyers are still allowed to pay for their own comprehensive home inspection and have the foreclosure purchase “contingent upon approval” of the results of the home inspection. Many foreclosures only require cosmetic repairs, but some do get vandalized by their former owners and require extensive repairs.
Short Sales, otherwise known as Pre-foreclosures, are homes that are usually being sold for less than the loans due from the borrower that still owns it.
The biggest drawback to purchasing a short sale home is that it is a very different and complicated process from an ordinary purchase. The lender or lenders, if there is a first and a second loan, must approve of the short sale, because they will be taking a loss on it.
Along with needing the lenders approvals, sometimes the lender will also try to negotiate a payment schedule with the seller for the amount of their deficiency. Because of these several factors, getting a response back from the lender or lenders, and the seller, on your offer always takes much longer, usually as much as a month, or more.
Many times the private owner may decide not to agree to make payments on the loan deficiency, or one of the lenders won’t accept the amount of loss. In these cases, any pending short sale offers would go unaccepted and the property would get sold back to the lender at the courthouse steps. The property, then, would take the next step in the process and become a bank owned foreclosure or REO.
To receive daily updates of bank owned homes, just put up for sale in San Diego county, go to http://www.Foreclosures-in-SanDiego.com
Donald S. McCraig, owner/broker of Premier Investors Realty and specialist in selling San Diego,CA foreclosure homes
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