Google buying a home and words like short sale, REO, bank owned, or regular sale pop up. All these terms can be a bit confusing.
Right now, on the San Francisco Peninsula market we are experiencing three very different niche markets.
- Regular / Normal Sale
- Short Sale
- Bank Owned Sale
Allow me a moment to explain what these three niche markets are and how they affect the buyer.
Regular / Normal Sale
These may feel like transactions of the past – but a normal sale is when the seller owns their property and the mortgage on the home is below the current home value. In other words – the seller has equity in their home. Equity is the profit for the seller. The best part of a normal sale is working with living breathing humans who will respond to a buyers offer within a normal period of time and provides the buyer with disclosures upfront that sometimes include a recent home or pest inspection. A quick glance at Redwood City last week (July 2011) showed 73% of the homes on the market are normal sales! Wow – not what you expect if you listen to the news!
Short Sale
These transactions are trickier than the rest. A short sale means, the seller owes MORE on their mortgage than the home is currently worth. They have negative equity. If circumstances change in the sellers life and they now need to sell their home – the home is placed on the market like a normal sale, however, when an offer comes in and the seller accepts it – it is their bank (where the mortgage is held) that needs to agree to take a shortage on their loan – thus the term Short Sale. Doing a short sale hurts a seller’s credit less than allowing the bank to foreclose. For a buyer it means patience since the response time for a bank to review their offer is anywhere between 3-6 months. Generally the seller still resides in the home and can provide disclosures upfront, though money is tight and the seller may opt to have the buyer pay for their own inspections. In Redwood City last week 17% of the homes on the market were known short sales.
REO (Real Estate Owned) or Bank Owned Sale
The REO or Bank Owned property is a post foreclosure property. That means the bank has foreclosed on the seller and now the bank owns the home and is selling it themselves. The good news – a bank can respond to a buyer’s offer within a week – instead of the 3-6 months on a short sale. The bad news, there are NO additional disclosures on the property aside from the CA mandatory disclosures. The buyer holds the burden of conducting their own home and pest inspections (plus any other investigating they desire) during their contingencies. Since the bank has never lived on the property they do not complete a Transfer Disclosure Statement that covers – along with many other items – neighborhood nuisances that a seller would have to disclose. Have no fear – as the buyer you are protected and will have time to inspect the home to ensure it is in satisfactory condition. Last week in Redwood City – 8% of homes for sale were bank owned.
(The remaining properties were 1% Auctions, 1% Court Confirmation /Probate Sales)
Got Questions? – The Caton Team is here to help. Email us at Info@TheCatonTeam.com or visit our website at http://thecatonteam.com/
Please enjoy my personal journey through homeownership at http://ajourneythroughhomeownership.wordpress.com/
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