Even experienced buyers may need some pointers on purchasing a property if one they’re considering is a short sale or foreclosure. Many things are the same, but there are importance differences – namely, the decision maker.
Traditional Sale. The homeowner is the seller and ultimately responsible for reviewing and accepting offers. If the property has been their primary residence, there may be some strong ties to the home, resulting in an emotional response. If the owner is an investor, they may take a much more business-like approach to negotiations. Typically the sellers have equity in the home, knowledge about the property’s condition and will provide disclosures to the buyer.
Short Sale. The seller is the homeowner who owes more on the loan than the property would sell for. In this case the bank (or banks) with the mortgage on the property will have to approve the purchase price, even though the seller is initially the one to sign the offer. The sellers and their agent may choose a price that is far under market value in order to stimulate quick response by potential buyers and stop the foreclosure process. However, that pricing may not reflect the value the bank will actually agree to. Most times, a notice of default has already been filed, and the seller is under pressure to sell the property before the bank initiates a trustee sale. A grossly underpriced house can indicate that the sale date is quickly approaching. The purpose of a short sale is to get agreement from the lien holders to release the liens and relieve the seller of the debt obligation.
Foreclosed Properties. (REOs) The foreclosure process has already occurred and the bank is the owner of record. They hire a real estate agent to prepare and market the house. List prices are usually under market value since the bank wants to sell the house quickly and get the asset off their books. Because the bank is taking a loss already, they generally don’t make additional repairs or concessions, but this can vary by neighborhood or local market conditions or, due to competition. In the Tri-Valley region, much of Alameda and Contra Costa Counties, inventory is far below ‘normal’ levels, and these lower priced properties move quickly with multiple offers.