What are the difference between a bank owned property and a short sale property? Does it matter after all I am getting a good deal? Right?
Well, the good deal is relative. Good deals sometime requires lots of patience and that is what it takes when buying short sale properties. But before we dive into what the differences are, lets cover bank owned properties first, because the explanation is more pleasant and I can end this article sooner without petering out on all the downside of dealing with short sales.
Bank Owned Property - What you should expect.
1. Most bank owned properties are sold "AS IS", buy like it is, as you see it or not see it, you get what you pay for, etc. Will the bank fix it? Well, NO...most of the time; might depend on price and/or health and safety.
2. Financing requirements or restriction. Buyer's lender may require some repairs, i.e. roof, siding, things that may jeopardize their investment, before they loan the money.
3. Seller Disclosures are limited. Although banks are required to provide a seller disclosure of the property, it will be of little use to buyers as the banks, may require the buyers to waive their right to a full disclosure.
4. Length of Time to Negotiate. Banks are businesses, not like your typical homeowner opened at more hours, so they work at their pace not at the home buyers bequest. However, from experience, you will run into some who will respond rather quickly, under a month. Seems rather length? Typical respond time can range from 3 months to 9 months.
5. Terms and Conditions. Banks will provide their own addendum that will give them the advantage in terms and conditions of a contract. This may require the buyer to pay for loan negotiation fees and/or hiring a lawyer to review paper work.
6. Inspections. Because there is insufficient information on the property's health, buyers may be pressed to hire more than one experts at buyers' expense.
7. Earnest Money deposit. Banks may require large deposit amounts and sometimes they may want it upfront before an offer is accepted. This creates more risks for the home buyer, i.e. tied up funds, unable to retrieve funds.
Short Sales - A lesson in patience.
1. Can anyone sell short? In today's market, anything is possible. Can anyone qualify to sell short? NO. The seller must provide proof of hardship, lack of ability or capacity to fulfill their debt obligation, to the lender.
2. Naive Lenders? There's an over whelming sense that home buyers think these lenders impatient and they want to get rid of these short sales. Not so. In fact, they are more patient than most For Sale By Owners. They are wiser, they paid for a broker's price opinion (BPO) before agreeing to a sale price. The BPO helps lender determine where they get the best profit: to foreclosure, to sell short for a higher price or not to allow a short sale.
3. Repairs. Most sellers will not be able to make repairs due to a lack of funds and they would prefer to sell their property "AS IS".
4. The Stretch to a Close. Many banks are backlogged and overwhelmed. It could be a guesswork of clogs, buyers need to be patient and understand that it may take months to get a single response to a buyer's offer. If there are more than one lien holder involved, it could take up a few months. Why? Negotiation period to satisfy all lien holders' vested interests, in other words they want their money and they don't want to be left empty handed.
5. Control, or lack thereof. Typical purchasing transaction requires seller to respond in a given amount of time but when dealing with a lender in a short sale, it isn't going to happen. The buyer leashed onto the lender's time line.
6. Fickle Lenders, last minute changes. Some lenders will choose to make last minute changes to negotiation terms which can cause the buyer's purchase to fail, i.e. loan qualification, patience.
7. Unmotivated Sellers. Most sellers will not receive money at closing and because of this they may lack the motivation to communicate, cooperative, or drive to close a sale.
Well, the good deal is relative. Good deals sometime requires lots of patience and that is what it takes when buying short sale properties. But before we dive into what the differences are, lets cover bank owned properties first, because the explanation is more pleasant and I can end this article sooner without petering out on all the downside of dealing with short sales.
Bank Owned Property - What you should expect.
1. Most bank owned properties are sold "AS IS", buy like it is, as you see it or not see it, you get what you pay for, etc. Will the bank fix it? Well, NO...most of the time; might depend on price and/or health and safety.
2. Financing requirements or restriction. Buyer's lender may require some repairs, i.e. roof, siding, things that may jeopardize their investment, before they loan the money.
3. Seller Disclosures are limited. Although banks are required to provide a seller disclosure of the property, it will be of little use to buyers as the banks, may require the buyers to waive their right to a full disclosure.
4. Length of Time to Negotiate. Banks are businesses, not like your typical homeowner opened at more hours, so they work at their pace not at the home buyers bequest. However, from experience, you will run into some who will respond rather quickly, under a month. Seems rather length? Typical respond time can range from 3 months to 9 months.
5. Terms and Conditions. Banks will provide their own addendum that will give them the advantage in terms and conditions of a contract. This may require the buyer to pay for loan negotiation fees and/or hiring a lawyer to review paper work.
6. Inspections. Because there is insufficient information on the property's health, buyers may be pressed to hire more than one experts at buyers' expense.
7. Earnest Money deposit. Banks may require large deposit amounts and sometimes they may want it upfront before an offer is accepted. This creates more risks for the home buyer, i.e. tied up funds, unable to retrieve funds.
Short Sales - A lesson in patience.
1. Can anyone sell short? In today's market, anything is possible. Can anyone qualify to sell short? NO. The seller must provide proof of hardship, lack of ability or capacity to fulfill their debt obligation, to the lender.
2. Naive Lenders? There's an over whelming sense that home buyers think these lenders impatient and they want to get rid of these short sales. Not so. In fact, they are more patient than most For Sale By Owners. They are wiser, they paid for a broker's price opinion (BPO) before agreeing to a sale price. The BPO helps lender determine where they get the best profit: to foreclosure, to sell short for a higher price or not to allow a short sale.
3. Repairs. Most sellers will not be able to make repairs due to a lack of funds and they would prefer to sell their property "AS IS".
4. The Stretch to a Close. Many banks are backlogged and overwhelmed. It could be a guesswork of clogs, buyers need to be patient and understand that it may take months to get a single response to a buyer's offer. If there are more than one lien holder involved, it could take up a few months. Why? Negotiation period to satisfy all lien holders' vested interests, in other words they want their money and they don't want to be left empty handed.
5. Control, or lack thereof. Typical purchasing transaction requires seller to respond in a given amount of time but when dealing with a lender in a short sale, it isn't going to happen. The buyer leashed onto the lender's time line.
6. Fickle Lenders, last minute changes. Some lenders will choose to make last minute changes to negotiation terms which can cause the buyer's purchase to fail, i.e. loan qualification, patience.
7. Unmotivated Sellers. Most sellers will not receive money at closing and because of this they may lack the motivation to communicate, cooperative, or drive to close a sale.
In short, from the field perspective, I find it more pleasant to know that I am dealing with a bank owned property than a short sale whether or not the property is qualified as a short sale. Bank owned properties are easier to deal with because the response is much quicker and there is only one party to deal with, the bank. While in a short sale, the seller can be unreasonable about pricing, there are often too many people involved, communication is difficult, everything drags on and on only to find out in three months that you didn't get the deal.
Good hunting to the bargainer.
