Pros & Cons: Foreclosures, Short Sales and Traditional Sales
If you have been looking at houses recently, you have undoubtedly heard of bank owned foreclosures, REO, short sales and traditional sales. Our goal is to help you understand the pros and cons of each of these sale types.
- Bank Owned Foreclosures (Also Known As REO)
- What it is:
- This is a property that was foreclosed on by the bank and is now for sale.
- The acronym REO stands for Real Estate Owned.
- Pros:
- The seller of the property is a bank that has no emotional attachment to the property…they are all about the numbers.
- They are often priced aggressively as the bank wants to sell the property as quick as possible. They want to stop the business of managing and selling property, and get back to the business of lending money.
- These homes are typically vacant and are very easy to show.
- The banks will usually respond to your offer in 3-5 business days.
- If the homes is owned by Fannie Mae, it may qualify for HomePath financing which only requires 3% down and does not require an appraisal or mortgage insurance (MI).
- Cons:
- Because these homes are aggressively priced, they often received multiple offers. This is where it becomes important to work with an agent that has a strong understanding of how to write your offer to make it stand out from the competition.
- These homes are sold as-is and the bank will often make no repairs. As you have probably seen in the news, many of these homes have been stripped by the previous owner and/or vandalized by criminals. Because of this, they may not qualify for FHA or VA financing.
- What it is:
- Short Sales
- What it is:
- A short sale occurs when a homeowner sells their home for less than what they owe on their mortgage.
- Pros:
- Many agents will not show short sales due to the long response time which opens up opportunities for those buyers that are not in a hurry to buy.
- These homes are typically in better condition than bank owned homes because the homeowner is usually still occupying them and taking care of the home.
- The banks will often accept less than market value because they do not want to foreclose on the home and take on the task of managing and selling the home.
- Cons:
- The process of negotiating a short sale with the mortgage bank typically takes 1-6 months.
- The bank is under no obligation to approve a short sale offer. Less than 50% of short sales that are submitted to banks are approved. Like bank owned homes, it is important to work with an agent that has a strong understanding of how to write your offer to give it the highest probability of being approved by the bank.
- Often times the banks will not pay off all of the liens against the property (HOA dues, property taxes, ….) and the buyer may be asked to pay for these items.
- What it is:
- Traditional Sales
- What it is:
- This is your typical, everyday traditional real estate sale.
- Pros:
- There are no bank headaches to deal with.
- The seller will often respond to offers within a couple days.
- These homes are typically in the best condition as the seller still lives in them and makes an effort to make their home look as presentable as possible.
- Cons:
- Sellers usually have emotional attachments to their home and can be a bit more difficult to negotiate with.
- These homes are typically occupied and require an appointment to show them
- What it is:
For more information about these different sales types, give me a call or shoot me an email. If you would like to search for available homes for sale, click the appropriate link below:
- Search Bank Owned Foreclosure Real Estate Homes For Sale in San Diego
- Search Short Sale Real Estate Homes For Sale in San Diego
- Search Traditional Sale Real Estate Homes For Sale in San Diego
Kyle Whissel
San Diego Real Estate Agent
858-699-3895
Kyle@WhisselRealty.com
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