REO homes are homes which have gone in to foreclosure and are now owned by a bank. Often there are some great buys (and with Fannie Mae and Freddie Mac) some great loan incentives available for buyers who are planning on living in the home. REO homes are sometimes not in the best shape and may require repairs due to years of deferred maintenance. REO homes are sold 'as is', so any repairs found in inspection are almost always YOUR problem.
A traditional sale may not offer you the best deal (like an REO) but there is often less work involved as most sellers today are aware their home has to be 'move in ready'. If you want a good deal on a traditional sale, concentrate on 'estate' sale homes. These are homes where the owner has either passed on or have gone into a nursing home. Often they might be a bit dated, but that can be remedied for low cost. You might find these advertised as 'Grandma houses' which is code word for 'needs some paint, carpet, etc'.
A "regular" traditional sale is between you and the Owner of the house. They have equity in it, and are not "distressed". They can set the selling price and call the shots.
A "Shortsale" is similar, but the Seller is distressed; they owe more on the house than it is worth. So they have to turn to the Bank for help: They ask the Bank to accept their "Hardship" and if the Bank agrees, you will need to get the Bank's approval. The Bank will be accepting less that the people owe on it. It probably will take a long time to get the approval and do the paperwork. Sometimes this is a "deal breaker". If you be patient, this could be a good way to get a house cheaply. But you cannot change your mind in the middle of the stream.
An "REO" is Real Estate Owned; this is property that has been through Foreclosure and now is owned by the Bank. You will deal with the Bank. The Bank sells the property As-IS, with no repairs. Usually, to get the bank to accept your closing costs, you will need to inflate the offer to cover them.
To buy a Shortsale or REO you will need a Realtor to help and guide you.
Good luck and may God bless
Regarding having the seller pay closing costs -- it's possible to have the seller pay for some or all of your closing costs on a short sale, regular sale, or REO -- depending on the offer and the situation.
I can understand why you might be discouraged. As you've noted, many listings in North Long Beach are short sales and the current status online is often out of date, which can be frustrating. I'd recommend finding a qualified, experienced Realtor who can help you identify a property that will meet your needs and price range and is actually available.
I hold a CDPE (Pre-Foreclosure Specialist Certification) and PSC (Pre-Foreclosure Specialist Certification) and have helped many buyers and sellers successfully close escrows. If you'd like more information or would like to schedule a meeting, please feel free to call 562-896-2456 or email me at Shannon@ShowMeHome.com. We'd be happy to help you!
My quick and dirty answer would be this--
A regular sale -- GOLD in this market. If you find one at a price you can deal with and that you like - write a GOOD offer, and quickly.
A short sale -- there is not enough equity to cover the seller's loan that needs to be paid off from when they purchased, or refinanced. This means the value of the home today is less than what they bought it for. This process is getting streamlined - but what you are hearing is true. You could end up waiting months for an answer because you are not *really* trying to buy the house from the seller... you're trying to get the seller's bank to take less money than they are truly owed ... and they don't want to agree to that easily.
An reo - real estate owned - is a home that a bank has already forclosed upon. A bank can price more aggressively so these seem like better deals but there are MANY factors that can make this untrue. (For example, having to take the house "as is," not getting any history on the house as is required disclosure in a regular sale, etc.)
There is a plethora of short sales in the area you are looking, again, for many reasons. The most basic way to explain it is that, at the top of the market, people who were stretching, to buy, found this area as an affordable option when they probably shouldn't have been buying in the 1st place. Or - maybe they could legitimately afford to buy, but their job situation changed and they didn't plan far enough out to be able to make their payments to weather that storm.
A good agent can TAILOR a search for you to either exclude these types of listings from your search entirely -- OR -- for example what I do for some of my clients is that I make calls to the properties they are interested in and work to get the back-story from the listing agent. I find out who the bank is, and I learn what their processing times are - so at least my buyers get realistic expectations. For example, if someone has a short sale with Ocwen as a servicer, I would frankly advise my buyers to pass on that as I know that this particular servicer takes 3 weeks just to schedule a return phone call.
Let me know if you'd like further help! Good luck with your search!
You have some very good answers here. I would like to add that REO properties typically sale for 40% below a comparable non distressed property. If the REO property is a HOME STEPS (Freddie Mac) property it will likely have a home warranty.There is often help with buyer's closing cost with HOME STEPS REO properties too.
Let not your heart be troubled, stay engaged in the home buying process. You are taking a big step by seeking advise from real estate professionals. "PEOPLE" will always tell you their horror stories, try not to listen to them.
Kawain Payne, Realtor
REO - Property owned by the bank.
Regular sale - Fair Market Value (Price is based on what similar homes are selling for in the area).
Your best opportunity to purchase a home where closing costs are paid for would be with a regular priced home. With a short sale or REO there isn't any equity left to pay for closing costs.
1) Banks have to answer to a request for modification in 30 days.
2) If the modification is not approved, they have to decide on a short sale in 30 days, which is selling the house for less than the loan (short of the loan). The seller walks away without a debt, and the bank avoids the foreclosure, which costs much more than the write off.
3) If the short sale is not approved, they have to consider a deed in lieu, which is giving the house as payment and walking away without paying the loan.
4) If nothing works the bank puts the house on an auction, and generally becomes the owner of the house (Real Estate Owned â€“ REO or Bank Owned)
- Standard sale: have equity (equity sale). They are well maintained and get better sale prices.
- Short sale: the sellers are living in it, even they may have delayed maintenance as a result of the financial stress that created the need to short sale, but also that the seller wonâ€™t get a penny from the sale proceeds, hence there is no motivation to prepare the house for sale. They only walk away from the debt.
- REOs are generally way cheaper, but generally in worst condition. Vandalism is possible. It is becoming more common that banks will clean and paint the property before sale. It is rare, but Iâ€™ve seen REOs in really good condition (the price is higher also). You have to shop around.
- The financing of an REO or Short Sale may require an FHA 203k that includes the repairs and appliances.
REAL FORTUNES ARE MADE IN DOWN MARKETS BEFORE THE BOOM.
IT'S TRUE RIGHT NOE FORECLOSURES ARE AT AN ALL-TIME HIGH INTEREST RATES ARE NEAR HISTORIC LOW,HOUSING INVENTORY IS AT 20 YEAR HIGH AND HOUSING PRICES HAV FALLEN AND FALLEN AND FALLEN.
LOOK AT THE INTEREST RATES ON THESE PROPERTIES,DON'T LOOK AT PRICES
SHORT SALES AND REO ARE THE BEST DEAL OUT THERE,BUT U DO HAV TO WAIT FOR BANK TO CLEAR TITLE ON THESE PROPERTIES,STILL BARGAIN!!!!!!!!!!!1
ALSO MUST SHORT SALE AND REO ARE DISTRESSED PROPERTIES THAT NEED REHAB, NEED WORK.
THINK OF THE INTEREST RATES, THIS FACTORS HAV CREATED A PERFECT STORM FOR YOU TO GET STARTED IN REAL ESTATE.
I;AM REO AND SHORT SALE SPECIALIST,THAT CAN FINE U YOUR DREAM HOME OR INVESTMENT PROPERTIES
Home buying does not have to be confusing.
To answer your question going from the simplest transaction to the most difficult:
1. Regular sale is when the seller has equity in their home. You negotiate directly with the home seller and reach an agreement as to price and other terms. There are no additional parties that have to approve the terms of the transaction as long as the appraisal supports your loan amount.
2. REO is a home that is owned by a bank. In many ways it is like a regular sale. However, because you are dealing with a bank and not an individual seller, things may be more complicated. Often times there are contract addendums that the bank wants you to complete, so it is good to have a Realtor who is knowledgeable about contracts.
3. A short sale is when the seller owes more on their home than they can sell it for. The "Short" in Short Sale means that the bank is going to have to accept less than what they are owed if the sale goes through. For this reason, the bank has final approval on price and terms of the transaction. The first step is to make an offer to the seller. When that is agreed to by the seller, it goes to the bank for approval. The approval process can take from a week or two to many months, depending on the speed of the bank. When you are involved in a short sale it is really a good idea to be represented by a Realtor who has handled several short sales so they can help you understand the process.
As always, when you are looking to purchase, it is smart to have a preapproval from a mortgage broker or a lender so you can make offers when you find a property that you like.
Call me at 562-212-2345 if I can help in any way, and good luck to you and your family.
Realtor and Loan Officer
ERA Buy America Real Estate Services
I can help with Short Sale, and REO sale. Please let me know what else can I help you.
I am working with Keller William at Long Beach, Please email me at email@example.com or visit my website at http://www.judywu.com or call me at my cell phone number at 714.989.6622.
Buying a home can be confusing - even if you've done it before and even if you don't have to deal with short sales and such. But people are buying houses every day! It can be done!
To answer your questions:
1. A short sale, when the amount the owner owes on their loan is more than what the home is worth, is a little more complicated than a standard sale and may take longer to close. But they are not nearly as frustrating as they used to be. These make up a large portion of the market and short sales are completed every day in Long Beach!
2. In a regular (standard) sale, a person is selling their home and will pay off the loan when escrow closes, and maybe even make a little money in the process. Terms of the sale such as price, length of escrow and helping with closing costs are all at the discretion of the seller in this case.
3. REOs are homes that are owned by a bank in most cases, because the previous owner lost the home in a foreclosure. Usually they are priced very cheaply. But they can have a lot of problems and you usually can't negotiate much. Often these homes are sold "as-is". But some of them are not in bad shape!
The most important thing is to find an agent who's job it is to watch out for your intertests and work hard at finding you a home that fits your needs. The negotiating and paperwork and everything involved in working with short sales and REOs is your agent's job and he or she will make sure you come out a happy homebuyer once it's all done!
Did you know that using a REALTOR doesn't cost you anything? Why would you try to do this all yourself when you can have a professional help you for FREE?
Give me a call and I'd be happy to find some homes you're interested in, and explain the pros and cons of each one. I'll make sure you get something great at a price you can afford!
Best of Luck!
An REO property stands for real estate owned. These are home's that the bank has taken back in a Foreclosure process where the owner's of the home have stopped making payments and the lender has taken back the property ownership. Do you have an agent who is doing a good job for you. ? I have been a Realtor for 39 years and know this business very well. Please give me a call so I can help you.
First Team Real Estate
TNG Real Estate Consutants
Long Beach, CA
Find yourself a trustworthy Long Beach agent to help you through your first time home purchase! Your agent will guide you through the options available, and the advantages and disadvantages of each. The differences between short sale, foreclosure sale (REO) and regular or standard sale have been well defined by the other respondents. What you should also know is that standard sales will normally close in 4 to 6 weeks; financially distressed properties usually take many months to close. Regrettably there is more demand for standard sale inventory in North Long Beach, than supply available. Have your agent hook you up to a listing alert that will identify standard sale properties as soon as they hit the market. Call me if you need more help.