Great Hawaiian Homes
Buying Short Sales, Foreclosures and REO's
Purchasing a short sale property will often mean that as the Buyer once the Seller has accepted and signed the Purchase Contract you will need to wait anywhere from a month to six months for the Lender holding the mortgage to approve the short sale.
The Lender may or may not accept the price and terms of the Purchase Contract and in some cases rewrite the whole contract all together. It is important to know that if you are working under time constraints that it may not be wise to place an offer on a short sale property.
It is also good to know that if you have an offer on a property that is a short sale that personal information may be requested from the lender for the short sale approval process to continue or that you may need to sign the lender's documents are almost duplicates of documents you already signed.
Patience and quick responses to request from the Lender are a must when buying short sales or REO's. Asking the question “Why?” won’t get you anywhere. The bottom line is if you want the home you have to do what the Lender wants or they will never give approval.
Bank owned properties or REO's are very similar to Short Sales with one exception. The owner is the Seller so you have eliminated the short sale approval process which entails the Seller to submit numerous financial documents and explanations about things. This usually means the process will be a bit faster and in many cases it is. However, there are exceptions.
If you want a Short Sale or REO property because you feel you will get more for your money this is where many are misguided. Home's prior to being sold unless it is a cash sale require an appraisal. The Appraiser goes out to the property and then looks at homes that have SOLD within the last six months. Sometimes they have to go outside of this window if there are no similar properties they can use for comps but most often there are. If homes sold that were short sales or foreclosures or REO's within the six month time frame that is comparable the Appraiser will use it in his valuation of the property. Which means the value of the home will be brought down.
If a Seller is selling and is not a short sale, foreclosure, or REO and thinks they will get a lot more money because of this they are misunderstanding the market. A Buyer may be willing to pay more BUT if they are going for financing they will need to come up with the difference if the appraised value does not cover the agreed upon price. That is if the Buyer decided to move forward with the sale. What happens most often is the Seller is forced to either accept the appraised value or they try to renegotiate the sales price where both parties contribute towards the difference.
Foreclosure properties are great if you can get one. What happens more often than not is you may win the initial bid but when it goes to court anyone willing to increase the bid by 10% of yours can walk away with owning it. More often than not, large investment groups do this. They watch the court dockets and appear in court and win the property - Especially, if it is a good deal in a good neighborhood. Be prepared for this to happen if you decide to play this game.
Also, you are often on your own when it comes to purchasing foreclosure properties. There is no Due Diligence you may have an opportunity to view the home if you are lucky, however, there will be no disclosure statements, or termite inspections or survey/staking. Most Realtors won't get involved unless you pay them for their time out of your pocket. You would probably be better off hiring an attorney who specializes in real estate to help you with this process.