Short Sale Avengers

Price and value are not the same when buying real estate. Price is simply a figure; a number; an amount that a given buyer wishes to pay or can afford. Value on the other hand is relative and possibly subjective, but one that generally represents “a lot (of house) for the money”. A buyer purchasing a property for tens of thousands of dollars below the listed price may feel good about the purchase, but may not have received as good a value as a buyer paying the listed price on a property that was priced below market.

As a home buyer or investor today, you are undoubtedly looking for “value” in what you purchase. You are likely asking yourself, “Where are the best values and how can I find them? What risks are involved with buying today and how can I increase my chances of finding the right property at the right price?”

There are four primary types of sellers in today’s market: regular seller sale, bank owned or foreclosure sale, corporate sale and short sale. Value can be found in any of these four types of seller offered properties.

Regular Seller Sales

The best value on regular seller sales is tied to seller motivation and the need to be competitive with the other types of sellers in the marketplace. Oftentimes these properties are in the best condition; a factor that adds “value” to the property. Many of these sellers have aggressively priced their property in order to compete with other types of sellers today. These sales typically offer the buyer more contractual protection when purchasing, as compared to corporate or foreclosure sales.

Foreclosure Sales

A foreclosure, commonly referred to as REO (real estate owned) property, is property that has had a legal proceeding in order to remove ownership/title from the homeowner and convey it to the lender. The lender then, in all foreclosure/REO sales, is the seller of the property. The lender ensures that the previous homeowner is no longer residing in the property prior to offering it for sale.

Foreclosures have been a popular target for many real estate buyers over the past few years. They oftentimes represent a good value because the price is low enough to offset the other risks involved in purchasing foreclosed property. While the price may be low, it may not always represent good “value”. There are numerous risks in purchasing foreclosed property.

What are the Risks of Buying a Foreclosure?

• Oftentimes the condition of a foreclosure is sub-standard and less than average due to the fact that the previous owner had not made house payments for perhaps a year or more, and in such cases, rarely kept up the property with respect to maintenance and repairs
• Standardized purchase agreements are rarely used, and if they are, the lender adds numerous addendums to protect their interests, to the disadvantage of the buyer
• Wording and the terms of purchase agreements are totally one-sided in favor of the lender
• Purchase agreements are only binding on the buyer, not the lender
• Lenders refuse to put money into the property for repairs
• Buyers must accept the property totally “as-is”
• Buyers rarely receives a Warranty Deed, but a lesser assurance of clean title
• Lenders tend to force buyers to use the lender’s title company

• Real estate brokers will soon be coming out with yet another disclosure; one that warns buyers to the risks of buying foreclosed/REO property

Visit www.MinnesotaDistressedProperty.com to learn more about the risks of buying bank foreclosures.

Corporate Sales

Corporate sales result when a homeowner’s employer or third-party company purchases their property as part of a relocation or guaranteed sales program, then subsequently offers the property for sale in the market. These types of sales are much less common today as a result of the economy; as employers do not want to own real estate and have taken a variety of measures to assist the employee in selling the property prior to having to take ownership of it. It is possible to find good value in property that is being sold as a result of a relocating seller, but oftentimes only after the property has been on the market for a while and pricing has become more competitive.

Short Sales

Short sales, which are vastly becoming the best “values” in the marketplace, are where shrewd buyers are now looking. There are pros and cons of buying a short sale property, but when such a transaction is handled correctly by the real estate representative(s) it can be a huge win for the buyer, the seller and even the lender. Visit www.MinnesotaDistressedProperty.com to learn more about the pros and cons of buying short sales.