Real estate professionals often take for granted that buyers know the difference, but many don't and it can be important to understand the difference before searching for that next home. You may decide you aren't a good candidate for some sales, so here's a run-down on the basics:
Short Sale – Be prepared for a long wait while the owners agent attempts to negotiate for the owner’s banks’ approvals on the short sale. Sometimes they aren’t approve, so you can end up back to square one looking for a house. If there are any repairs needed to the house, you will likely be the one paying for those repairs if you want to buy the house, as short sale sellers resources are often depleted. On the other hand, you will likely get an excellent price too, and you can usually get up to 3% help with closing costs.
REO, Bank Owned, HUD homes, VA homes – These can be a very attractively priced as well, but be prepared to compete for the good properties. In the lower price ranges you will likely be competing with investors acquiring rental properties. They usually buy with CASH, and multiple offer situations are common, so ‘low-ball’ offers are generally not effective, although that can be a function of how long the house has been on the market. Once your offer has been accepted you will be expected to close quickly. So, these generally close within 30-45 days of contract.
Foreclosure Sale – an actual ‘foreclosure sale’ is what is likely to eventually happen after an owner has defaulted on the terms of their loan agreement, and the Trustee has completed a legal process resulting in the property being offered for sale on the courthouse steps. Some are able to Short Sale their homes before a foreclosure occurs. It generally takes a large deposit, and funds ready to close within a very short time frame to buy these properties. Your average buyer is not able to buy homes this way, and banks will often “buy back” the property at the debt price, at the auction. So, this property later ends up being listing for sale by the bank or lending institution that took it back, and being generically advertised for sale as a “Foreclosure Property”, when in reality it is one of the above, REO (Real Estate Owned), Bank Owned, HUD or VA homes.
"Normal Sale" - I would not isolate my search to just the ‘distressed sale’ homes. Many “Normal Sales” are attractively priced regardless of not being in a distressed financial situation, as many Sellers look to liquidate their current asset and move on to other excellent opportunities current market conditions offer. If a homeowner is looking to move up in house size, the incredibly low interest rates allow them to leverage a lot more house. So, given the big picture, they will often compete on price as necessary to attract a buyer. Also, “Normal Sales” won’t have as many hurdles to cross as a Short Sale and will generally close in 30-60 days. If you need to have a known move in date (roof over your head!), this can be very important.
Richard Snow, Owner/Broker EXIT Realty Expertise
7947 Kings Highway, King George, VA
Serving all of your real estate needs in the greater Fredericksburg, VA and Southern Maryland area including the counties of Prince William, Stafford, Spotsylvania, Louisa, Caroline, King George, Westmoreland, Richmond, Northumberland, Essex, Charles, Prince George's, St. Mary's and towns of Dahlgren, Colonial Beach and Montross.