The Often Bumpy Road to Home Ownership:
Short Sales, Foreclosures, and REOs, and why it doesn't have to be that way

Today's real estate market is a vastly different landscape than it was a mere two years ago. As we have seen, credit has tightened and a flood of short sales, foreclosures, and Real Estate Owned (REO) properties have hit the market.

So why are home buyers so frustrated?

"Short Sale / Bank Approval" Properties - Believe it or not, there are real estate agents who list "short sale / bank approval" properties with very little understanding of or experience with the short sale approval process. They may not even know how many or which lenders hold mortgages on the property, the length of time it will take to receive the bank's approval, or how many potential lien holders they may be (mechanics liens, tax liens, utility liens, etc.). Some agents merely receive an authorization to speak with the home owner's primary mortgage company and list the property without doing any further research. So they might not know how motivated the lender is, what price they are likely to accept, or the special conditions they may wish to impose on the buyer (financial approvals, closing time frame, selection of title company, etc.). In the meanwhile, hopeful buyers get excited about the price, submit a purchase agreement, and wait, and wait, and wait. Often they find that the listing agent is either unresponsive, inexperienced, or both. Frustrations set in for the buyers who have their hearts set on that home, yet they're really not in a position to be patient and wait. Today's buyers have many choices, but they may still feel that they've been deprived of a good deal.

Real Estate Owned (REO) Properties - The lenders, banks, and other corporations who own real estate a (REOs) and want to get these properties off of their books are extremely motivated. They may be pressured to meet a "margin call" so they are often willing to negotiate on the price as well as a number of issues such as the physical condition, winterization, mold, utilities reconnection fees, warranties, and the like. Much of the frustration felt by these buyers stems from the over abundance of properties held by the listing REO team of real estate agents. The sheer volume of un-returned phone calls combined with very slow response times provided by some of these REO teams can be too much for a buyer to endure. As a result, untrained buyer's agents who show these properties to their buyers without extensive consultation and education merely causes more buyer frustration.

The Solution - In order to avoid these headaches, buyers must seek out and hire real estate professionals who educate and consult with their buyers. This is essential in developing a strategic plan that is capable of facilitating the creation of personal wealth through real estate transactions for the buyer. Helping consumers understand the process as well as the advantages and disadvantages of purchasing retail, wholesale, or fire sale is essential in today's dynamic real estate marketplace.

Trained Professionals + Educated Consumers = Wealth Enhancement
for everyone involved. Meanwhile, the affiliate industries (title companies, lenders, movers, stagers, etc.) begin flourishing with increased activity and our whole economy will being to stand tall once again.

As a concerned buyer or potential buyer, you need to seek out and hire an area specialist, who has experience with and is trained in REOs and short sales. Choose a REALTOR^®, like myself who will educate and consult with you in order to navigate the often difficult path to a successful short sale or REO purchase.

What's in a name? There are important differences between retail, short sale, and REO properties. Here is a chart to help you sort it all out and decide which is the best for you!

	Retail	Short Sale	REO
Price Categories	"Retail"	"Wholesale"	"Fire Sale"
Likely Seller's Situation	Current on mortgage	In default and/or in foreclosure process.	Foreclosure process complete.
Likely Price Ranges	Market Value	Below Market Value	Below or Well Below Market Value.
Likely Price Reductions	Occasionally - usually small price adjustments are made to stay current within the retail market.	Possible - However the bank may have already figured large reductions into their list price. Low ball offers are usually rejected.	Frequently - Often the lender will allow price reductions of up to 10% on a regular basis until it sells. Low ball offers may be countered if time on market is substantial.
Likely Decision Maker	Homeowner	Lender(s) & Homeowner	Lender
Likely Advantages	Liabilities and Condition - For the most part, these homes do not have outstanding mechanics liens or other encumbrances (other than the mortgage), are in good to excellent condition, and sellers will often allow inspection contingencies.	Occupation - these homes are generally occupied by the homeowner who may be able to provide information on the condition of the home via the seller's disclosure statement and who may deter acts of vandalism on the property.	Price - REOs are generally listed at the "rock bottom" price. Since the foreclosure is complete all other encumbrances are eliminated and most problems associated with "short sales" are eliminated. A single entity (lender) will be responsible for all seller's decisions.
Likely Disadvantages	Price - generally these homes sell at or near the full market value.	Information - Some agents list properties for sale with little knowledge of the approval process for a short sale, if there are mechanics or other liens on the property, how many lenders are involved, which lenders are involved, the lenders' response times, potential liens on the property, etc. Inspection contingencies are not accepted.	Condition - REOs (Real Estate Owned) properties are sold "as is" and are often in average to poor condition. Inspections may be allowed, but offers with contingencies will not be accepted.  Homes that are not immediately inhabitable will be difficult to finance and many will require a cash only purchase.
Likelihood of Successful Purchase	Easily obtainable.	Virtually unobtainable.	Obtainable, but the process may take a little time.

Check out my real estate blog on Active Rain!

For more information about my services or how I can help you find your next home, sell your home, buy a business or investment property. Just call me today at 763-548-1418!

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Associates of Science Degree in Geographic Information Systems and Cartography
from Anoka Ramsey Community College in Coon Rapids, Minnesota.

   Licensed in Minnesota
   Equal Housing Opportunity