|
 |
What is the
difference between a “short sale” & a “foreclosure?”
In the case of a short sale, the lienholder (bank) agrees to accept a
payoff less than the full amount owed, writing off the difference.
How it works: A contract is negotiated between a buyer and seller,
then submitted to the bank for approval. What the bank is actually
"approving" is the final payoff they will receive as a result of the
terms of the contract, not the contract itself. The bank will order a broker price opinion (known as a BPO). After a thorough (and
often time consuming) evaluation of the seller’s financial situation,
the terms of the contract and the outcome of the BPO, the bank will
either approve the payoff, thereby allowing the sale to continue, or instruct the parties to make changes in
order to get approval. If changes are requested, the buyer and seller
must renegotiate the contract, or agree to cancel it.
In the case of a “foreclosure,” the bank has already taken the
property back from the original owner via court-ordered auction, and
now owns it. A bank-owned property is also known as an “REO” (stands
for “real estate owned”). Bank owned property is sold in the same
manner as traditional property, and doesn’t typically include the
long waiting periods experienced in a short sale.
In a short sale, how are multiple offers handled?
It is important to remember that in a short sale situation, the bank
is not a party to the sales contract. The contract is still
between one buyer and one seller. The bank's approval of a short
payoff is only a "contingency" of the contract, just like buyer
financing or inspection might be. So, the bank does not consider
"offers." In order for a bank to consider approving a short
sale, they need to be presented with a fully executed contract,
representing a meeting of the minds between the buyer and seller.
It is a common (mis)understanding that banks will consider "multiple
offers" for a short sale and pick the highest one - that's not
technically accurate. If a seller is presented with multiple
offers from separate buyers, he/she may only sign ONE of them.
That one becomes the primary contract. Any other offers can be
signed, but only as "backup contracts." The seller cannot agree
to sell the same property to two different parties. All of these
contracts can be put in front of the bank for consideration.
With multiple contracts to consider, the bank becomes aware that the
property is desirable (because multiple parties are vying for it).
They may also become aware that one of the "backup buyers" is willing
to pay more than the "primary buyer" which would net them more money
as a payoff. If this is the case, the bank will not approve the
sale for the primary contract. They will give the seller a "net
number" which they require as a payoff, and then wait for the seller
to bring them a contract that gets them that number. They don't
care from which buyer it is!
How are multiple offers handled in a bank owned foreclosure?
Multiple offers are very common with bank owned foreclosures, so much
so that the buyer is typically required to sign a disclosure
acknowledging the fact that there may be multiple offers whether there
currently are or not. In the face of multiple offers, most banks
will go back to all the buyers and ask them to resubmit their offers
containing their "highest and best" price and terms. The bank
gives everyone a deadline (usually 24-72 hours), and then "decides who
gets it" once they've got all the new offers in front of them.
Why work with a foreclosure and short sale expert?
In today’s market, there are thousands of properties being marketed
as “foreclosures” and “short sales.” Unfortunately, not every agent
is properly trained or experienced enough to navigate the complicated
process of these special transactions. Often times, properties
marketed as “short sales” are never approved by the bank for reasons
that could have been uncovered in the very beginning given a little
research.
We have the knowledge and experience necessary to represent you in a
foreclosure or short sale purchase, protecting your investment and
getting you the very best deal possible.
What’s a better deal? Bank-owned foreclosures (REO’s) or short
sales?
Banks do not want to be homeowners, so they are very anxious to
unload their REO’s, often at bargain prices. This desire to not own
property extends to short sales too. They have enough trouble dealing
with the number of foreclosure properties they already own, they
don’t want to take on any more! For these reasons, great deals can be
made on both bank-owned foreclosures AND short sales.
That said, with a short sale situation the bank doesn’t own the
property YET. So, chances are, given the same exact property - one
already an REO and the other an “REO-in-waiting” short sale - the
bank is more likely to make a deal on the REO.
Are these the BEST deals out there?
Bank owned foreclosures and short sales are certainly bargains when
negotiated properly, but they aren’t the only game in town. Private
sellers are having to compete with these listings along with the
countless other properties for sale in their own communities. We can
find you deals beyond just bank owned and short sales, negotiating to
get you the best price possible.
We are a full service company. We can represent you in any
transaction from bank owned and short sale to traditional, estate and
even “for sale by owner” properties. If it’s for sale, we do it.
I’ve tried calling banks directly, why won’t they give me a list
of their properties?
Banks do not want to deal directly with the public. When they take a
property back in foreclosure, they do one of three things with it: 1)
Hold onto it until it’s saleable (i.e. liens cleared, repairs made,
etc), upon which time they will proceed with selling it, 2) Hire an
auction company to auction it (usually combined with many other
properties at the same time) or 3) List it for sale with a real
estate agent who then markets it to the public,
We know how to identify foreclosure and short sale properties, and to
negotiate with the bank to get you the lowest price possible. It is
very important to make sure you are represented exclusively, and not
by a listing agent who’s got a responsibility to get the highest
price possible for the seller. We work for you alone.
Back to Top |
