As an National Assoc. of Realtors Accredited Buyer's Representative (ABR) [ see http://rebac.net/ ], I have done both. In my personal opinion, REOs are a much better way to go than Short Sales. Consider these points:
1) REOs are after the Short Sale process has failed. These properties are now bank-owned and which now has the Bank carrying all of the costs for upkeep, insurance, utilities, etc. Banks do not like owning REOs, so they are highly motivated to get the property â€œoff the booksâ€, which works in the Buyerâ€™s favor.
2) It takes few days to hear whether your offer has been accepted in an REO. Short Sales are typically at least a 45-60 day waiting period before you hear back from the Bank. However, I have had Short Sales where it took 99 days to get a â€œyesâ€ and then they only provided 5 days to close escrow â€“ and this was an all cash offer!
3) Unless you specifically remove the option via your offer, in a Short Sale the property will likely remain "on market" allowing potentially better offers to come in while the bank decides. This means your time waiting to hear back from the bank may be wasted. You can easily be moved into an REO well within 30 days, or sooner.
4) REOs are much easier to show, because the former owners are no longer living in the house. Also, first-level agent inspections are easier because the property doesnâ€™t have anything blocking oneâ€™s view. Some may view this a trivial, but you can really find out a lot about a house when its empty because it focuses you on the walls & floors rather than pictures and furniture, for example.
5) If you use an FHA loan you can ask for up to a 6% seller credit where typically this is maxed at 3% for non-FHA financing. I have negotiated a 6% seller credit on all my REO purchases this year.
The only downside to REOs that I can think of is possibly that in "hot" areas you may never see a REO property because they are snatched up during the Short Sale process. However, looking at by-city distressed property stats I have yet to see 100% short sales.
Steven A. Ornellas, GRI, ABR, e-PRO, CMPS, RE Masters, MBA
REALTORÂ® / Mortgage Banker-Broker / Certified Mortgage Planning Specialist
Steven Anthony Real Estate & Financial Services
Expect Excellence. Get What You Expect.â„¢
We have successfully closed 4 short sales recently and I have one short sale that will be approved today. I also have another new one coming up next week.
Statistics show that only 50% of short sales actually end up closing, but with my short sales, it has been 100% so far. I would be happy to help you with a short sale and discuss the details of how it works.
What you need to know before you start is, it can take a long time to close especially if the seller has two loans on the property and the price your offer gets accepted by the seller can be countered to a higher offer by the sellers lender after they do their BPO (Broker Price Opinion). So don't get too excited when you get a very low offer accepted by the seller.
Please call me at 510-279-9580 offline and I will discuss more.
Without agent level of access you are dependent on the agent's information. Simply ask for the MLS # or if you want to be picky, ask for the MLS sheet that show him/her as the selling agent. With that said, an agent with as little as 3 short sales under their belt probably has enough experience to represent you well. The selling agent's side of the short sale is mostly diligence in follow up as well as a good attitude. Nasty agents that don't follow up routinely leave the buyer in the dark and tick off the listing agent. These deals take patience on all sides.
There are key questions your agent should know about the short sale listing:
1) How many lenders and balance due each lender. Where the loans original for purchase loans or are there equity lines involved? Once you know the lenders, Google them with the words short sale next to them and you will see what luck folks have had with being successful with approvals. ( Some have horrible reputations and others have been reasonable.)
2.) Find out how many offers have been made and how many are with the bank for approval. If you can find out how many have been countered.
3.) Ask if a NOD (notice of default) has been filed. A NOD implies the pending doom of a Trustee Sale. From the NOD date - a lender can foreclose with 111 days. Some do take longer but realize the time line may be tight to work out a deal.
Hope this helps.
Most agents will share their experience level by phone, so you might consider conducting phone interviews. I have excellent knowledge of the short sale process and would be most pleased to sit down and discuss the process, how it works and how I can help.
Empire Realty Associates