With so many foreclosed homes on the market, you may be trying to decide whether to buy an REO vs. short sale. Both types of home may present an opportunity for you to buy a home below market value.
With so many foreclosed homes on the market, you may be trying to decide whether to buy an REO vs. short sale. Both types of home may present an opportunity for you to buy a home below market value.
Real estate owned (REO) properties are homes owned by banks and other lenders. These properties either did not receive a minimum bid at auction or the lender chose to sell them directly instead of having an auction. Since the REO home is already foreclosed, the lender wants a price as close to the market value of the home as possible.
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REO homes sell in an as-in condition. Typically the lender allows you to pay for a home inspection before making an offer. If the home inspection discloses problems with the property, you may be able to negotiate a price lower than the market value. If you do not get an inspection, you may buy a home that needs costly repairs and therefore is not such a bargain.
Short sale properties are being sold by the owner for less than he or she owes on the house. This doens't necessarily mean the home is priced below market value. Typically, the market value dropped between the time the current homeower purchased the house and now. These homes tend to compare favorably in the decision to buy REO vs. short sale properties, as they tend to be better maintained than an empty, foreclosed property. This is not always the case, however. You will want to get an inspection on these homes too.
Short sellers are also often trying to sell before foreclosure to save their credit, which means that they're more likely to accept offers slightly below market value than those owners going through a typical sale. Although the homeowner may accept a lowball offer, keep in mind that the lender must approve any offer and wants to recoup as much of the mortgage balance as possible.
Your decision whether to buy REO vs. short sale homes often comes down primarily to the possible savings on each home. Both sales processes can result in the purchase of a home below market price. The National Association of Realtors states that homes purchased through a short sale or through foreclosure listings may be priced 20 percent below market values. This savings can be significantly less if the property needs major repairs.
A real estate agent can help you choose between REO vs. short sale homes by weighing the pros and cons of each home individually. To find an agent who specializes in short sales and foreclosed homes, go to Reply! for professionals in your area.