Home Buying in Ladera Ranch>Question Details

Housewife, Home Buyer in Ladera Ranch, CA

Is it a better deal (price) with a short sale or foreclosed house?

Asked by Housewife, Ladera Ranch, CA Mon Jun 22, 2009

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I guess everyone has their own opinion, so I'll share mine. I believe the REO's (bank owned properties) are the better deals if you can get your offer accepted! However, there's so much competition for them, that they almost always sell for over the asking price. This is the same for Short sales. Short sales are priced low on purpose to stimulate activity and multiple offers. However, these prices are not approved by the bank and all offers are subject to lender approval. There are no guarantees with short sales and they are a very lengthy process. While they are awaiting lender approval, the listing is generally kept in Active status and they continue to collect offers on them. The REO's on the other hand have legitimate prices listed - the bank has already agreed on the price and they have already foreclosed on the homes so now they just want to unload them. The bank is not in the business of selling homes, so the sooner they can unload them the better. Another problem with short sales is that you can hang in there with the hope of getting the property and it is possible that the property gets foreclosed on in the end. This is happening less now as short sales are becoming more prevalent, but not all short sales are successful and you need to keep this in mind. In either case, the banks are losing money and they are always priced well below market value. They are definite deals, which is why there is so much interest in them right now. Investors are out with all cash offers, which also makes it difficult to compete with if you require financing. Also lenders are being very cautious and it is difficult to obtain a loan right now...even though interest rates are low and they are very attractive. In most cases you need minimum 20% down. With investment property, minimum 30% down. Hope this helps. I set up my clients with emails of the latest new bank owned properties so that they see them as soon as they hit the MLS. If not, you don't have a chance at them. Let me know if you'd like me to set you up for a bank owned property search. I can set you up for short sale searches as well, although I personally prefer to avoid them. My email is: cfleming@coldwellbanker.com.
1 vote Thank Flag Link Mon Jun 22, 2009
Just in case you are still reading this, I thought I'd get up to speed for today. Ladera has 177 houses on the market and 8 of those are REOs (foreclosed) but there are 97 short sales available. Buying a short sale takes time and patients on your part. Having an agent in there working for you and knowing what they are doing is the second thing you have to have. Third thing is to make sure the listing agent knows how to work the short sale. The buyers agent can't get the deal to closing if the listing agent doesn't know how to negotiate with the bank.
0 votes Thank Flag Link Tue Sep 14, 2010
The answer is - IT DEPENDS. Why? In this 13 word question, there are four key words that have different meanings to different people. Here are the four words that will make a difference in what will work best for you:
1. Better. Better how? Better place for you to raise your family? Better condition than anything else on the market? Lowest purchase price? Fewest repairs required? Lowest out of pocket for you to purchase? It depends on what your definition of better is to know how to answer this question. The more you can define what you are looking for the better you will be able to identify it when you find it.
2. Deal. This is such a subjective term when it comes to Real Estate in Orange County. If the REO is "trashed" with no appliances, no flooring, and no toilets and you are using FHA financing, getting an FHA 203K loan to make the repairs, and the purchase price + the cost to repair may be slightly under the current market value of the home, then you may call that a deal. Compared to the turnkey, upgraded Short Sale that you just move right in to. A deal is in the eye of the beholder. You need to consider what you want, what level of repairs you are willing to and financially capable of making, and figure that into your definition of a deal.
3. Price. Do you mean net price - contract price minus any credits from the seller and in addition to any cost you'll bear to make it liveable? Do you mean price in comparison to the comps? Do you mean the price on any house in the general area you'd like to live or the price your may be able to get on the home that meets 80% or more of your specific requirements in a home? Do you mean the price of the monthly payments including principal, interest, property taxes and assessments, home owner's insurance, and home owner's association dues? Do you mean price per square foot, which is a common leveling factor to compare home values?
And finally, .....
4. House. Are you looking for something to buy and lease out? Is this something you want to actually live in? Do you want hardwood floors, granite counters, and stainless steele appliances? Do white kitchen cabinets work for you? Do you need grass in the back yard? A house you find that you can make your home, where you'll make your own memories, may be the greatest house you'll ever find - regardless of whether it's a Short Sale, and REO, or a traditional seller.

Just some thoughts. Hope this helps if others are still working through this question.

Leslie Eskidlsen
Realtor, Altera Real Estate
Mission Viejo, CA
949-678-3373
Leslie@LeslieEskildsen.com
http://www.LeslieEskildsen.com
http://www.WhatAgentsFearTellingYou.com
Weekly in the Orange County Register Sunday Real Estate Section:
http://www.ocregister.com/articles/talk-262056-house-realtor.html
0 votes Thank Flag Link Mon Sep 13, 2010
Hi there,

I don't think there are any hard and fast answers to this. A home is a good deal based on itself. I often find that "sellers-with-equity" are also good deals. Maybe you will see them higher priced in the listings, but if an equity seller is on the market right now....there is a reason. They have room to negotiate and can close quickly. They can also make repairs and help with closing costs. Often bank-owned and short sale listings are priced artificially lower to get quick interest and offers when the actual purchase price will be higher.

I recently had an appraisal problem......the bank lowered the appraisal 3 days before the close in an appraisal review. The difference was $15,000 which the sellers contributed immediately to get the deal closed. A bank or short sale would not be able to do that.....or at least not easily.

The key is to look at all aspects of a home to see if it's a good deal. I always advise my buyers not to pre-judge, but then we have to check the comps, and condition and terms and determine if it's a good deal or not!

Hope this helps.....great place to get opinions from Realtors, and we all have them :).

K
0 votes Thank Flag Link Sat Jan 2, 2010
If you can, find an aggressive knowledgable realtor in the area you really want to live in Ladera and have that person find you a "pre"foreclosed home.
0 votes Thank Flag Link Wed Dec 16, 2009
Hi Housewife,

I believe Cynthia has provided a great answer. Generally speaking, I too believe in the REO's as typically being better deals by their legitimate list price. Also, if you place any value/price on your time and frustration, please understand that short sale is definitely going to create significant costs versus savings in this area. Please note that I have represented clients in some short sales that have been relatively quick and easy, but those are few and far between these days.

Ultimately, I encourage all to work with Realtors who are truly experts in the area of your search. They can learn more about the capacity of a short sale to transact and will guide you accordingly. At the same time, they can evaluate REO properties and I believe you will find these ultimately prevailing on value. Also, I always encourage my clients to have an inspection and write their contracts contingent upon the inspection.

I wrote a synopsis at the bottom of the webpage in the link below. It is a light-hearted look at foreclosures/REOs and short sales. Take a look if you would like.
0 votes Thank Flag Link Tue Jun 23, 2009
Hi Housewife,
It really depends on the house, its condition and location and your tolerance for "fixing up". Without specific knowledge of any of these variables, its impossible to answer that question. Grab a realtor knowledgeable in both those areas and good luck!
0 votes Thank Flag Link Tue Jun 23, 2009
H -

The "better deals" are short sales. Most REO properties have been "trashed" and thus are priced low and receive multiple offers. Remember, an REO listing agent has those properties in inventory for a long time before the bank releases them to the public. As a result there are multiple offers even before they are listed on the MLS because there is typically an REO sign on the property.

As for short sales, if you are patient, you can get a great deal on a well-maintained property 1) because the seller still lives there and 2) because most buyers are not patient enough to wait for the approval.

Stay away from short sale properties where Countrywide, WaMu or HSBC hold the mortgage - those are taking way too long and most times they will not come to selling terms acceptable to everyone. No need to wait for one of these when there are many more available. Your REALTOR can assist you to determine which are {legacy} Countrywide, {legacy} WaMu or HSBC.

Best of luck, the market is yours....

Thom Colby
Broker / REALTOR
Orange County, CA
Web Reference: http://www.thomcolby.com
0 votes Thank Flag Link Mon Jun 22, 2009
It can depend on the price range you are in. The lowest priced properties are having a lot of offers on them whether short sales or REOs. There aren't many REOs right now so most likely you will be dealing with a short sale and they are getting better at getting done quicker. Your agent ,if you have one, will have to make sure that you are the only offer being sent to the bank and you will then have to be commited to that property.
Any questions check my profile.
0 votes Thank Flag Link Mon Jun 22, 2009
If you are not in a hurry to move, you can get a good deal on a short-sale. They take alot longer, you have to have patience. There is a little less competition than the REO's (bank-owned).
0 votes Thank Flag Link Mon Jun 22, 2009
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