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If you are new to the market and looking to take advantage of today's discounted home prices or if you have not been in the market for some time, it can be helpful to be educated on today's market transactions.  There are three primary types of sales (short sale, foreclosure and a traditional sale) and few odd balls (relocation, probate sales). Here is a break down with a few tips on each.

1.  Short Sale - the net proceeds from the sale will not be enough to pay off the amount the seller owes under his mortgage(s).  As a result, the bank is involved in sale.  The bank first reviews the financial situation of the seller and the value of the home (typically ordering an appraisal or broker price opinion).  The bank then reviews the offer to see if its at or near fair market value and then either consents or does not consent to the sale.  This is often a timely process and typically is not done in less than 60 days (with 90 -120 not being unusual).  It requires a different expectation when it comes to the time frame and the more lenders (first lender, second lender and/or equity line), the longer the time frame.

Short sales also require an experienced agent who will submit the appropriate addendums and provide the proper advice.  For example, without the proper short sale paperwork, your good faith deposit could be tied up needlessly for months on a transaction that is uncertain...or without the proper advice you could be encouraged to incur the cost of a home inspection before the bank approves the short sale--a risky proposition. 

Short sales can have an advantage over a foreclosure because the home owner is still around and is required to provide you with disclosures.   They can be a great deal if you have the time, patience and right advice.

2.  Traditional sale - these are the easy ones.  You submit an offer and within 3 days you should know if you an accepted offer.  Most people are familiar with this type of sale.   The seller generally has enough equity to pay off the lender(s) and the transaction moves along as it has in times past.  

3.  Foreclosures/REO - these are homes that are owned by the bank.  The bank has acquired them through either a foreclosure or a deed in lieu of foreclosure (where the seller "gives" the home back to the bank rather than forcing the bank to go through the foreclosure process). 

Once you make an offer on a foreclosure (also called an "REO" for Real Estate Owned), you can expect to hear back within 24 hours to one week.  Often times the bank will require that you execute all documents first and sign some additional, bank specific addendums before the bank signs the acceptance of your offer.  Sometimes the counter offer negotiations are verbal and then confirmed in writing.  Not exactly legal or enforceable, but reality and the law are often not compatable.  Its just how the banks do it. 

The risk with a foreclosure is that the homeowner is not around.  You do not get the benefit of knowing anything about the property from the home owner.  The disclosures about the property are limited because the bank knows little to nothing about the history of the property when it comes to thinks like plumbing, maintenance etc.  You can offset some of this risk by carefully selecting a good home inspector.  Do not hesitate to hire specific, additional inspectors for things like pool equipment. 

4.  Probate - this is the sale of a property after the death of an owner.  It does not mean the owner died in it (if he did, that is a separate disclosure).  The proceeds are used to pay off any creditors and the heirs.  These types of sales may require court approval--which is a relatively simple process.

5.  Relocation - this is the type of sale where the owner is being or has been relocated.  Depending on the terms of the seller's relocation package he may benefit from an incentive to sell the property himself (receiving a fee from the relocation company if he sells it before the relocation company takes over).  These types of sales generally require some additional addendums prepared by the relocation company.  Otherwise they are much like a traditional sale.

If you have any questions about a type of sale or any real estate related questing, do not hesitate to email me or give me a call.  johnsonlaw@sbcglobal.net

Happy home shopping.

Melinda (714) 863-5485