Are there more homes available for sale than what is on the MLS? Can someone explain the different types (foreclosure, bank owned, short sale, etc.)

Asked by Dani, Melbourne Beach, FL Wed Jan 11, 2012

We are in the very beginning stages of looking to buy our first home. We have a real estate agent "picked out" but havent started really working with her. We are taking care of some credit issues this month, and are planning on meeting with the lender in February to see where we are at with getting pre-approved. We are looking for our "forever home" that we can raise our babies in. Just to get an idea of what is out there, we look through the MLS often. My question is this, are there more homes out there available for purchase than what we are seeing on MLS? Most on MLS seem to be short sales in "contingency". I have done some reading up on what a short sale is, and the process involved (just to educatte myself). But what other "types" are there that we may not be seeing. It seems there are a lot of foreclosures / bank owned that are not showing up on MLS. How do we find out about ALL of our options? And which should we avoid as we are not looking for an investment but our home forever

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James Moyer, Agent, Mesa, AZ
Wed Jan 11, 2012
Wow what a wonderful question:

Foreclosure - homes are already foreclosed or in the process of foreclosure.

Bank Owned - house has already been through the foreclosure process and have been taken back by the bank.

Short Sale - sale of a home where the homeowner owes more to their lender than what the home is worth.
1 vote
Tammy Hayes, Agent, Port Charlotte, FL
Wed Jan 11, 2012
Buying a Short Sale

Buying a short sale is not like buying a property in a traditional way. A short sale may have some risk but it also can be very rewarding. When you are searching for a short sale you will want to make sure you are prepared. Here are some things you will need to consider.

First of all, you need to make sure that you have enough time. It takes anywhere from 30 days to 6 months or even more to get an answer on a short sale. It really depends on many factors. It requires a proof of funds letter if paying cash or a pre-approval letter from a lender if obtaining a mortgage. The seller must approve the purchase offer before it gets submitted to the bank. The bank may come back with a counteroffer or reject your offer completely. In some instances you may not even hear back from the bank at all.

Short sales take a long time because the bank has to review it and they are back logged with many short sales and don't have enough coverage to complete them in a timely manner. The bank typically is willing to work with the seller and buyer on short sales to help avoid foreclosure. The bank can ask the buyer to pay some of the liens or HOA fees. Some lenders will only pay up to a certain dollar amount and ask the buyer to pay the remainder or there is no deal.

One of the benefits of buying a short sale is that the bank is typically willing to accept less money for the property because of the time and risk involved. So you generally are getting the home at below market value.

If you have the time to wait, a short sale is a good way to go. One thing to be sure to ask when purchasing a short sale is, "who is handling it?" Is the Realtor an experienced short sale expert? Or is the listing agent using a Short Sale company that strictly focuses on short sales? By having someone with knowledge and expertise in short sales, it will make the process go much smoother and faster.

Tammy Hayes, Realtor, Green Lion Realty, Port Charlotte, FL
1 vote
Tammy Hayes, Agent, Port Charlotte, FL
Wed Jan 11, 2012
Buying a REO/Bank Owned Property

Buying a foreclosed property can differ in many ways than other more standard transactions. All offers are contingent on financing and must be accompanied by a pre-approval letter. Some banks require a pre-approval letter from a certain lender, so be sure to read guidelines before submitting an offer. All cash offers require proof of funds with the letterhead of where the funds are being held and the buyers name listed. Actual account numbers can be blackened out, as long as buyers name is easily visible. Write your offer as seller chooses the title company as they have already started preliminary title work on these properties.

All offers must be written offers, on an As-Is contract only Some banks supply addendums in advance, and if that is the case it will be in the MLS as an attachment and should be signed and dated and submitted along with your offer. In most cases, however, the bank addendums are provided only after buyer and seller come to agreement. At that time, the bank will send their bank addendums/counter offer for buyer's signatures. Please note at this point, the bank has still not signed anything, and most likely will not sign until ALL forms have been signed by the buyer. Your offer is considered a pending contract until it is returned from the bank/seller with their final approval. In the interim, all offers that come in must be presented. When signing and initialing a bank addendum, do not alter it in any way or it will be rejected.

The usual time frame for a response to your offer is 3-5 business days, although sometimes a little sooner and occasionally a bit longer. Allow plenty of time for acceptance, and for closing the deal, 30-45 days in most cases.

If you are requesting seller concessions for buyers closing cots, pre-paids, or repairs, make sure those are requested in the written offer, as adding these things at a later date can be very difficult and most times impossible. If you are writing an offer for an FHA or VA purchase, please make sure the property will meet the standards for this type of financing. The majority of the time, repairs are not permitted prior to closing. Ask the lender if they allow the buyer to escrow their own funds for repairs.

Once you have a fully executed contract, time is of the essence. All inspections must be done in a timely manner according to the contract. Should the buyer not be accepting the conditions, written notice must be obtained prior to end of inspection period along with a signed cancellation and release form. Some banks will make earnest money non-refundable after the end of the inspection period. Read your addendums carefully.

Please note that bank owned properties closings are considered mail-aways, because the title companies that are used to close the transactions are usually located out of our general area. Some will send a mobile notary to the buyers agents office to close the transaction and then all documents are overnighted to the title company, but it is not considered officially closed until all original documents and funds are received.

A lot of foreclosures are going into multiple offer situations. Most buyers think that if they have the highest purchase price, they're going to get the property. Often this is not always the case. One of the big things they look at is the timeframe for the inspection. This is a contingency on the contract and the banks want it satisfied ASAP. Instead of the usual inspection period of 15 days, if you can do it in l0 days or less, the better. Another is the timeframe for closing. If paying cash they usually prefer the closing date to be no more than 2 weeks. A conventional loan can be 30 days and FHA 45. Just make sure you are prepared to close in the specified time or you could be charged $100 per day or more for each day beyond the original closing date. Also a larger deposit generally indicates a more serious buyer in their eyes.

Another point is to not go into another month. For instance, if you can close on the third week of the month it’s usually preferred. They usually don't like to close in the last few days of the month because it might have to be extended into the next month. The banks like to close out their books each month and not have to extend. This is especially true if it is the end of the quarter. Lower offers have been accepted because the closing date was the third week in the month.
1 vote
Dani, Home Buyer, Melbourne Beach, FL
Wed Jan 11, 2012
Thanks for the help!
OK, so I should assume that if I am not really seeing anything on the public MLS that interests me, that doesn't mean there arent more options out there that I just may not know of.
And the only way to get to "see" EVERYTHING available is through my agent??
So, short sales take a long time and can be a "headache" from what I understand. What about bank owned? Foreclosures? Are those both similar to short sales in the same sense?
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Annette Law…, Agent, Palm Harbor, FL
Wed Jan 11, 2012
Yes, there most certainly is.
Many of the great bargains you see as 'solds' never appeared in the MLS.
There are more than 20 ways to sell a home and more than 15 ways to finance a home. The offers you see on the MLS and on the aggregate websites are presented by those who basically know of only one way to buy and sell a home.

To detail the difference and options in a forum such as this would be a great dis-service to you and those reading. Your agent is your resource for getting this information regarding ALL of your options.

Your situation, objectives, time parameter and funding will dictate which market segment is most suitable for you. And please be aware and accept the fact you will NEVER be able to participate in ALL the options. There are over 20 ways to sell a home and over 15 ways to finance a home. Only a few of these will have any relevance to your situation. Your agent, however, will be able to find you the available homes that are compatible with your situation.

Now, go out and find yourself a great home to buy.
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Christopher…, Agent, Tarrytown, NY
Wed Jan 11, 2012
Hi, It depends on the MLS you are using. Onl;y agents have access to the complete local MLS, the version consumers get on websites, etc are usually limited. Ask them if they have Listing Book or try Listing Book is great because it automatically updates every 30 mins from the local MLS thus making the data the most accurate. It is also interactive, you can leave property notes for your agent and they can respons etc. There are also for sale by owner properties that won't be included in the MLS, but your agent can check for those too.

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Jeanne Feeni…, Agent, Basking Ridge, NJ
Wed Jan 11, 2012
Hi Dani, you have made a good first decision in selecting an agent. Particularly as a first time buyer, a good agent will be an essential resource.

Here in NJ, all actively listed properties are reflected in the MLS for the area, and that includes short sales and bank-owned deals that have been listed for sale. I advise my buyers to focus on what is in the MLS and assure them that I can and will include listed "distressed" (shorts and bank-owned) deals in their search unless they tell me otherwise. MLS differ- but my MLS recently implemented a field "lender approval required" that is a yes/no/unknown field and can be searched upon.

In the end the MLS is the definitive word on actively listed properties. It will not include for sale by owners unless they have chosen to work with a listing conduit to get the MLS - there are quite a number of those on our site - those that are there are "cooperating" with buyers agents. Sites that allow individual agents to in put data - and Trulia is one of them - can become outdated IF the agent forgets to update their input. Also, feeds from Realty Trac provide foreward looks at what MAY come into a distressed pipe down the road, captuing late payments. But I find the info more distracting than helpful to buyers.

My suggestion is to allow your agent to guide you and to get you started with searches. Your agent should be able and willing to make the process much easier for you. Ask your agent to guide you resources that capture what is available to be purchased in your price point in your area.

To confim your readiness to buy and that you are looking in the right price point, get yourself preapproved by a reputable lender.

Good luck to you!
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
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