Home Buying in 92101>Question Details

Aw211, Real Estate Pro in Los Angeles, CA

is it easier to buy a short sale or a foreclosure for the price one wants to pay?

Asked by Aw211, Los Angeles, CA Sat Aug 20, 2011

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23
Hi,

There is no single answer to this....each situation is different. Both can be purchased for good prices and both can come back with unreasonably high counters. The only way to see is to find a very good agent and analyze each situation on it's merits....the comps.

I don't work in Los Angeles..but have a great agent up there that I refer people to. Let me know if you'd like to get her name...shoot me an email and I'll put you two in touch. She's great and can really help you make sure you are getting the best possible price/terms.

Karen
1 vote Thank Flag Link Sun Aug 21, 2011
you are asking two questions at once:

(didn't think I would noticem huh?)

The statistic I've seen is 10% of the Shortsales that are applied for actually go thru.
Once it gets to Escrow?Contract, the number is signifantly higher, but still only 40%.

As to which is the lower price/better value:
Short Sales are generally in better condition, and,
Foreclosures are almost always rough; needing some work.
So it is hard to compare them.
I would venture to say that it comes out about even.

So, why go with a Short Sale and the time element;
Because it's there!

Good luck and may God bless
1 vote Thank Flag Link Sat Aug 20, 2011
A foreclosure by far. You can get acceptance on an offer in hours, sometimes it can take a few weeks depending on the bank's red tape, but the process is nothing like a short sale. Only 2 or 3 short sales out of 5 even close. I know some agents will say they've closed all their short sales, but it's not up to any one agent, no matter how good he/she is, it's up to the lender and any investors involved.

As a buyer's agent, I had a client with a really strong offer in first place position not close. The bank actually foreclosed on the property anyway after telling the listing agent the auction was postponed. That one came back on the market as an REO (bank owned foreclosure) several weeks later for $40,000 less. Another time the bank wanted the buyer to pay a significant amount of money in escrow, and the buyers didn't have enough, so that sale fell through. A different time the sellers filed for bankruptcy mid-escrow, and that stopped the short sale in it's tracks. The buyers got their good faith deposit back, but they paid $500 for an appraisal and $375 for an inspection - a lot of money for some buyers to lose. No one has control over the buyer's actions or the bank's; anything can happen, and not all banks cooperate.

I've never had a foreclosure fall through, of course all the properties were chosen wisely, and repairs well negotiated, sometimes cleverly. These homes are not always in the best shape sometimes, but at least you get to own it in 30 days if the bank can close by then, and most can. Let me know if you'd like help with your home search.

Warm Regards,
Cory
1 vote Thank Flag Link Sat Aug 20, 2011
That depends.... hmmmm. In a short sale...if you can talk to the listing agent in the beginning and convince them that submitting an offer to the bank AT LIST PRICE or OVER LIST PRICE is the deadliest thing they can do....and get them to submit a LOWER OFFER which is what really needs to be done...then a short sale would be good....just beware that there is no guarantee of the outcome and be ready to wait out the approval period.
It all depends on the negotiator in a short sale. If the listing agent is a savvy negotiator then great..if the buyer agent is a savvy negotiator and the listing agent will allow the buyer agent to do the negotiations..then awesome! It's whoever is a better and more experienced negotiator.
In a bank owned home...once it is listed on the mls or market..the bank wants the price it is listed at or higher. They really won't entertain low ball offers. It all depends on if the property is priced right to begin with.... if it is..then it will go in a few days with multiple offers..if it is too high, then it will sit and sit and sit..and this could be a good time..when the bank is not getting offers anymore, yet they have not lowered the price yet...to come in with a realistic offer at a price it really needs to be at...and this is when you usually get lucky and can get it at a lower price.... Hope this helps...
0 votes Thank Flag Link Thu May 17, 2012
I would agree that foreclosures are easier by far. Purchasing a traditional sale with an equity seller is makes it easier still.

If a bank is involved with a deal, it's terms are typically far less flexible than those with a traditional seller. During the past several years, I've honestly found it far easier to cut a good deal when there is a real person on the other side of the table. Give it some thought!
0 votes Thank Flag Link Wed May 16, 2012
I've found foreclosures are way easier to purchase (if you win the multiple offer battle that often happens here in Portland, OR). Are foreclosures or short sales a better deal? Depends on the house, I've seen amazing deals on both sides.
0 votes Thank Flag Link Wed May 16, 2012
I have been doing Shorts, REOs and Foreclosures for almost 20 years now. It has become more and more difficult for each.

Foreclosures use to be the easiest Real Estate transactions. I mean the Real Foreclosures at the court house steps AUCTION.

Buyer shows up at the auction,
Trustee starts the auction with the opening bid, in most cases, the total amount that was owed ( mortgage balance plus late fees ) plus trustee fees

Trustee opens up for further bids.

YOU the buyer make your bid, at least $100 more than the Trustees Opening amount.

If you WIN the bid, you give your big certified check ( 5 % to 10% of your bid amount ) to the Trustee

You fill out the paperwork, and after the upset bid period. Some states do not have an upset period, but the auction is absolute.

If the auction is absolute you must have the FULL amount in a cashier’s check made out to the Trustee.

If there is an upset bid period, 10 or 30 days for example, the Trustee calls you to meet at the court house and you bring the balance of funds needed to the Trustee, and you finish the paperwork.

VOILA the house is yours. Simple and clean transaction.

Notes:
SOLD AS IS
Inspection is by and for your info only, Seller does not care
No Loan, must have Cash or good banker to work with.

Just because you purchase the home at action, does not mean you bought a great deal. Some of these foreclosures are being sold for MORE then the value of the home is with in the current local market place.

Do your home work. Foreclosures are not for the faint of heart.

Good Luck
0 votes Thank Flag Link Wed May 16, 2012
Short sales and foreclosures are the most difficult transaction. Usually there are multiple offers and often there are long waits and big demands from the bank. The buyer usually has to pay for a lot of things that a regular seller would pay for - termite repairs, inspection repairs, etc...
Sometimes a foreclosure is a really good deal, especially if it is the right house for you.
I would encourage you to look at everything that is on the market that meets your search criteria. Don't just focus on the foreclosures and short sales.
Happy house hunting and good luck.
Janet McCarthy
Connect Realty
jmccarthyhomes@gmail.com
http://www.BestSanDiegoHomesGuide.com
0 votes Thank Flag Link Wed May 16, 2012
Cash is King. If you are paying cash for the property foreclosures are easier to handle, especially if you make a very clean offer with very few contingencies (physical inspection, termite inspection and that's it). If that is the situation, Banks prefer these type of offers and you can get your price if it is not too low or unreasonable.

In a short sale, I prefer to go with the ones where the Listing Agent publishes the price that the Bank will take. Usually, in these kind of situations a previous Buyer submited an offer and the offer was accepted or countered by the Bank but the Buyer decided to "walk" and not buy the house (too much time went by, financing failed, etc) but there is a price figure that the Bank will accept; so, if you offer the same price you could get the deal and it will go much faster than the regular short sale where the Seller's paperwork needs to be sent to the Lender, Buyer's paperwork needs to be sent also and weeks or months can go by without an answer.
0 votes Thank Flag Link Tue May 15, 2012
Absolutely no question - REO properties are much easier. REO's are much like regular sales - you have a finite contract time, and once accepted you are in contract.

REO's do have some differences from regular sales though:

1. You can wait some time from verbal acceptance to receiving the signed contract- sometimes weeks.
2. You can do inspections but you won't get the same level of disclosures - reo's are exempt from many because the lenders never occupied the property.
3. Response times can be much slower and contract timelines often expire during the process but can still close
4. REO agents are often out of area and don't know the market which makes the process a lot more complicated.

Foregoing aside, prices are often better than market if you are willing to deal. Also note that these properties often need repairs/upgrades, but we have done a lot of these and it has always been worth it.

Short sales are much more complicated because there are generally no definitive timelines and they can take up to months to close - or not. Although we have also done successful short sales I would go for foreclosures and save the headache.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes Thank Flag Link Fri Apr 20, 2012
It is certainly easier to buy a foreclosure than a short sale. With a forelcosure, you will know what price the bank wants becuase it is generally llisted on the MLS. Wtih a short sale, bidding is really a guessing game as to what the lender is looking for.

As for control over your price, there honestly tends to be very little when buying either a short sale or a foreclosure. Banks rule and it's based entirely on numbers.

You certainly are free to write an offer for the price you choose. If there are multiple offers on either a short sale or a foreclosure, banks will generally choose the highest bidder and the one wtih the most cash down.

I've found that I can often negotiate a better deal for my buyers when bidding on a traditional, equity sale. With these, a personal letter, personal feelings between buyer and seller all play a role and can often help a buyer when a seller like the buyer.
0 votes Thank Flag Link Thu Apr 19, 2012
The truth is that both can be difficult. It is true that a Short Sale can fall through, and it may have more opportunities to do so. This is because there are so many requirements that are needed. It is only through diligence that a Short Sale gets closed and often times it feels like divine intervention when the transaction is over.

At the risk of sounding like an infomercial I will say that RE Market Solutions has closed over 1000 Short Sale Transactions. I wish I could say that we have not had a transaction fall through, but that would be ludicrous. Yes there have been transactions that have feel through, but our percentages are very high.

Of course our success has much to do with our focus on providing the Short Sale negotiation. We do occasionally represent a homeowner, but by and large we help real estate professionals. It is through constantly working with the Short Sale market that we have such success.

Which is easier a Foreclosure or Short Sale? I suppose that depends on a lot of factors. If your agent is working with a Short Sale negotiation team, or the agent is experienced with Short Sales, it can be relatively painless. REO property can be less complicated but still has it nuances. Either way the agents representing both sides (or the bank) better have it together.

In the end I feel that buying a home in many circumstances is about the home its self. If you find a home that you like, in a good neighborhood, and provides you with the amenities you desire; the type of transaction won’t matter.

Of course if you are buying the home as an investment, then that changes everything.

Hope this helps,
Terry Hammill

RE Market Solutions provides Short Sale solutions for Real Estate professionals and their Clients. No upfront fees, no gimmicks… There are no problems, only solutions…
0 votes Thank Flag Link Thu Apr 19, 2012
Either one really in my opinion. The Foreclosure will be a quicker process but the short sale will have have a better chance to negotiate the final price if the listing agent really knows what they are doing with the banks involved.
0 votes Thank Flag Link Sun Aug 21, 2011
Aw,

Perhaps it's different in LA, but generally speaking you will get a foreclosure cheaper than a short sale. More importantly, once an offer price is accepted you won't get any last minute requests from the bank to pony up more cash, and you can close them in 30 days just like any other transaction.

In our area most short sales take significantly longer, often ending in no deal and buyers who are frustrated by having waited for months just to start looking all over again.



Either way, make sure you have inspections as sellers on their way out and in financial distress are not usually taking care of maintenance the way they should.

Best Regards,

Lance King/Owner-Managing Broker
lance@fixedrateproperties.com
415.722.5549
DRE# 01384425
0 votes Thank Flag Link Sun Aug 21, 2011
Neither transaction is easy.
If the price one wants to pay is reasonable to the owner:
a. the foreclosure's yours in 30-45 days.
b. the short sale could be yours in 6+ months....if you're lucky.
Web Reference: http://www.321property.com
0 votes Thank Flag Link Sun Aug 21, 2011
Hmmm your question is a double edged sword. It is easier to get an answer faster after making an offer on an REO or bank owned home than it is on a short sale, unless the short has has been approved by the bank at a certain price.
There is no easy way to say you will be able to buy a short sale for the price u want, because the offer has to go to the bank. Also, before your offer goes to the bank, you have to make sure the agent listing the short sale and the owners of the house ACCEPT your offer in order to submit it to the bank. Then you have to go thru the waiting period to see IF, god forbid, your price will be accepted. Rarely does the bank accept the price that a buyer submits, especially if it is a low one. They will usually counter offer you. If the bank does not get a price they are willing to sell it for. They have no problem letting it go to foreclosure. Or if you don't agree to the price, and walk, then agent has the ability to take a back up offer who WILL pay the higher price in order to avoid foreclosure. There is NO STEALING a home for a low price. Same with the FORECLOSURE property. U can submit an offer and bank may agree and let u open escrow. However, if they don't, then they will wait for another higher offer from a back up buyer.
You can get good deals on houses that, if they are not a bank foreclosure or short sale, have been on the market for a while and have not sold. These homes are usually overpriced and if the agent would simply have lowered the price , it would have sold. These are the people who usually are NOW ready to listen to reason and SELL.
Good luck! There are lots of deals out there whether they are short sales, foreclosures, or regular sales. Just be diligent and you will get lucky and find one that u like.

Sheyenne Schultz 310-429-4170 shy@shysells.com
Need to BUY? Just call Shy!
Real Estate Network Group
REO/Short Sale Specialist.
Web Reference: http://www.shysells.com
0 votes Thank Flag Link Sat Aug 20, 2011
In my experience, most of my clients have been able to get their homes at lower prices with less competition in purchasing a Short Sale. However the primary drawback has been the excess time it takes to close on the Short Sale and the uncertainty. It just takes some patience. Because I also specialize in short sale listings, I can usually ease my clients concerns and avoid any potential pitfalls. Bank owned homes are usually ready to go and can close quicker. They can also be a great bargain as well.

All the best,
Paul Doroshuk, Broker
i4uRealty
San Diego
Web Reference: http://www.i4urealty.com
0 votes Thank Flag Link Sat Aug 20, 2011
Hi

You pretty much got the idea now and the answer on your question so I won't talk much about the differences here between shortsales and foreclosures(bank owned). I do a lot if shortsales and love them (sometimes:)) but it could be a two sides of the coin sometimes. If you get lucky with an agent that negotiates the file you might get the following benefits;
1. Decent price deal
2. Good condition of the home
3. Better chances for your offer to be accepted
Here are the negative sides;
1. Longer wait time (3-7 months)
2. Transaction might not go thru and house will be foreclosed
3. Accepted price will be changed to much higher
4. You could be asked to pay some upfront fees or extra charges

Foreclosures(bank owned) mostly is a fastest sale but also have bad and good sides. Here is a good side;
1. Fast buy
2. Clean deal
3. A lot of times price can be a great deal if offer accepted
4. No surprises
Bad sides;
1. If FHA financing or low downpayment, your offer will be almost the last one to be accepted
2. Most of bank owned have multiple offers and you have to overbid

So do your homework and think.
Your realtor will have to dedicate all 100% of his time to your success to be on top of the listings as they arrive on the market!!

Wish you best luck with your house hunting.
0 votes Thank Flag Link Sat Aug 20, 2011
HI Aw, Short Sales are really a long process. Prices vary we're seeing a sale price of about 40% to 50% of what is owed on the properties.
Foreclosures are a faster way of getting the properties.Short Sales have to be approved it can take months to close and up to 2yrs as we're seeing. Foreclosures is pretty fast.

Remember both come with headaches that you may not get in a regular sale.
Condition of properties, prior liens may apply with foreclosures. Beware of the thousands and thousands of dollars you may spend in short sales or foreclosures as opposed to regular sales.

All the Best
Dave & Lisa
Web Reference: http://www.urhomerealty.net
0 votes Thank Flag Link Sat Aug 20, 2011
Short sale and foreclosure are two different process they are different from regular real estate purchase. Both need to follow specific process.The price one wants to pay has to be approved or agreed by the involving lenders.Before engaged in these process one should know about short sale and foreclosure.Finally it is easy if the lenders except the price one wants to pay otherwise not,then one needs to negotiate.Thank you.
0 votes Thank Flag Link Sat Aug 20, 2011
A foreclosure is ready to buy immediately. Banks will negotiate price, but not a lot. There is often opportunity to negotiate closing costs for buyers making them great deals!

Short sales still average 6months in wait time, and once the bank sets a price, there is little negotiating room. Usually no more than 5%.

Id go for a foreclosure unless I had s specific reason to venture on short sales or it was the perfect home & I was willing to wait on a
0 votes Thank Flag Link Sat Aug 20, 2011
Regarding a foreclosure when you negotiate a price it is what is and you know once you open escrow. Most foreclosures are priced below market to begin with.

Regarding a short sale you can negotiate a price with the seller and the bank may not agree to that amount. You could wait months for a response and it could not come back favorable. However usually you can get a short sale for less money if you are not in a rush.
0 votes Thank Flag Link Sat Aug 20, 2011
It is if you are patient. Short sales typically take 3 to 6 months. I just closed on at Bella Pacific that took 9 months. The buyer was in escrow for $315,000, but by the time we had bank approval the value had dropped to $285,000. I got the bank to accept the lender's appraisal and close!

Call me if you want to discuss this more
Phil Gorman, Broker
Keller Williams Realty
619-252-7828
0 votes Thank Flag Link Sat Aug 20, 2011
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