This week has been absolutely crazy. Sorry for the lack of posts. I had a few ideas early in the week. Then they were swept away by CE classes, major problems with a deal, and an offer. As I mentioned: INSANE. But in a good way.
Anyway, I attend a great CE class on Wed. titled "Short Sales and Foreclosures." Since I'm dealing with a problematic short sale deal, what a pertinent class topic! It was taught by Suzanne Cytryn, a settlement attorney for over 15 years.
There were 3 things I found really compelling about the class: she has no great love for real estate auctions, buyer beware on REO properties and short sales aren't as bad as they seem.
The first topic: Real Estate Auctions. This is when you actually go to the auction and buy a property. The house has been foreclosed upon and it's up for auction. If nobody buys it, the bank usually purchases the property and sells it. Some pitfalls to the auction: You can't inspect the property before you purchase it, (eek!), the owners/tenants might still be living there and then you have to evict them, those same owners/tenants might inflict major damage as they are evicted, the utilities/taxes/etc. are not pro-rated to the date you close but to the date of the contract, and buyer usually pays all closing costs. I'm with her on this..this sounds horrible!
The second topic: REO Properties. These are properties that are actually already owned by the bank. This is what you typically see in the MLS. What she meant by "buyer beware" is the LONG bank addendum that accompanies these types of properties. The properties are always "as is". You're basically giving up all of your rights when you sign one. If anything happens (mold, termite damage, etc.), you've given up your right to sue the bank for any of the problems. BUT you do get to inspect the property before you buy it. You also get clear title to the property. Out of the two, this is your better option because at least you know what you're getting when you purchase the property.
The third topic: Short Sales. This occurs when "the outstanding obligations (loans) against the property are greater than what the property can be sold for. The borrower (normally the seller) proposes that the secured lender accept a compromised (reduced) payoff amount upon the sale of the property." Although they are called short sales, there's nothing short about them. They take a minimum of 2 months to complete. Banks are getting faster at processing short sales but there's a lot of paper work and documentation needed to make it to closing. You must be exceedingly patient. If it works out, it's usually a win-win situation for the buyer and seller. The seller avoids foreclosure and ruining their credit. The buyer gets an excellent deal.
If you're a buyer in this market, you're encountering these situations daily. In fact, you might be seeking these types of properties. Hopefully my CE class will help you too! Have a great weekend.