Frequently Asked Questions
The current real estate environment is different from any other in modern history and there is an over abundance of information that is available to the consumer. This amount of information can become overwhelming and confusing and can be difficult to extrapolate what is relevant and irrelevant to you, my client. As such, I pride myself in keeping informed about our market and wanted to share some information with you of some frequently asked questions:
What is the difference between a Short Sale and Bank Owned or REO property?
A short sale occurs when a homeowner enters into an agreement with their mortgage lender to accept a price that is below what is currently owed on a property and the remaining balance of the loan is forgiven by the lender . This will ONLY occur if the homeowner has proven to their mortgage lender that they are financially distressed which could eventually result in the property being foreclosed upon by the lender.
A foreclosure occurs when a homeowner falls behind in paying the mortgage to their lender. There is a three step process that occurs to result in a foreclosure. The first step is known as pre-foreclosure where the lender will initiate foreclosure proceedings after the homeowner has failed to make payments on their home for three months, consecutively. At this point, if the homeowner cannot or will not pay what is owed to the lender, the property will move onto step two or, the public auction phase. If the home is not sold during this phase, then the lender will repossess the property and become the owner of record. This is commonly referred to as a REO property (Real Estate Owned) or bank owned property.
Which is a better deal, a Short Sale or an REO Property?
Honestly, both a short sale or a REO can have advantages and disadvantages that a potential homeowner may face as they go through the process of buying the property. Because of this, it is imperative that you work with a team of professionals that understand the market and can help navigate through the process in the most efficient manner. It is recommended that you have a Realtor and a Lender that are working on your behalf to negotiate the best terms and price for you in the transaction.
How do I know that my Realtor and Lender are working with my best interest at heart if I am only interested in Short Sales or REO Properties?
This question needs to be looked at from two perspectives; the mortgage lender or seller’s side and the potential homeowner’s side.
From a business perspective, a potential homeowner needs to understand what the property means to both parties involved in the transaction. From the seller’s side, the property in both a short sale or REO is a depreciating asset which needs to be disposed of as quickly as possible to help cut or eliminate costs that are tied to the property. If the property is a short sale, the current homeowner is a financially distressed and is hoping to sell the property before foreclosure proceedings begin. The current homeowner is at the mercy of the mortgage lender to accept the terms that are offered by a perspective homeowner. The mortgage lender is already agreeing upon allowing the property to be sold at a price that is below what it currently owed. If the property on the other hand is an REO, the property has costs that are adding up on a daily basis. They no longer have a homeowner that is making payments on the property and now they are liable for maintaining the property in the hopes that it may sell at a discounted price.
From a potential homeowner’s perspective, they want to make sure they are buying a property that is a good financial investment to make, but it is also a place that they will call home. Because of this, it can be emotional and the potential homeowner needs to determine what type of Realtor and Lender they would like to have on their side throughout the process. This comes down to basic concept of doing business with like minded individuals. Simply put, your Realtor and Lender should listen to your needs first and foremost and they must also have the experience, knowledge and character to be your advocate throughout the home buying cycle.
Do I need to have an LSR to make an offer on a property?
Absolutely, the LSR is a requirement in today’s market and must be included with the offer to purchase a property. The LSR demonstrates to the seller that you are preapproved to purchase the home and it details the amount you are preapproved for, your proposed loan amount, the type of financing and whether or not there are any real estate contingencies that are involved.
These are just a few questions that seem to be commonplace in the dialogue that I have with many buyers in today’s market. As we progress through the fact finding phase of the process and additional questions arise, please do not hesitate to call upon me at anytime because I know that the more information and education that I can provide you with will certainly arm you with more ammunition when buying a home. I am looking forward to sharing more information with you and will devote my expertise to ensure that the home buying process is one that you will look back on and smile.
OH, BY THE WAY I'm never too busy for your referrals!
