Bank Owned and Short Sale Properties
Over the last nearly two years, I’ve seen a huge surge of foreclosed, or real estate owned (REO) properties around Green Lake and other nearby neighborhoods. In fact one broker I know specializing in just this.
But what is the difference between a short sale and bank owned property? I had a client ask this exact question of me last Saturday as we were out in full force looking at REO properties.
Short sales = seller owes more than the value of the house. Upside down equity. They qualify for a hardship, don’t pay their mortgage for 60 days and the process begins. The object is to try to sell the house before it’s foreclosed on because the lienholder gets (most) of their money back when they sell for less as opposed to getting no money when it goes back on the bank’s books.
Bank owned = short sale didn’t sell the house. No one bought it at auction. So the house goes back to the bank who is now the “seller”. Owner gets a bankruptcy on their credit.
I definitely don’t shy away from either scenarios. If my client wants to get a screaming deal then I’m not stopping them. What constitutes a screaming deal is usually 10 to 20% lower than the retail market value for these bank owned properties. The lower market value attracts offers quickly usually as soon as the Listing hits the market. Which leads me to talk about…
Multiple offers. Yes! Many multiple offers on bank owned properties these days. Is it on purpose? Well…the bank does want to create a bidding war so yes, it’s on purpose – they want that financial burden off their books. And with a bidding war means hopefully the bank gets more $$.
How should a buyer’s agent handle multiple offers on a bank owned property? It starts with excellent communication between me and the listing broker (who represents the bank). The bank will ask for the best and highest offer via an electronic bid. Folks involved are the listing agent, an asset manager, and the bank. Many moving parts here so indeed COMMUNICATION is the key – and quite possibly getting your offer accepted.
HOW TO MAKE THE BEST “HIGHEST AND BEST OFFER”: The BEST offer is not always the highest price. Terms are considered such as… are there any contingincies? How many days to closing? Is there a pre-quailification letter? Is it a cash sale? Cash is not always king when you low–ball it. What type of mortgage is it? FHA is the favorite choice of Buyers but least favorite by Sellers.
My top tips are to read the directions for submitting offers and follow them. The less corrections the better. Eliminate all contingencies except for a 7 day home inspection and mortgage contingency. Which means waiving appraisal. Place a closing date 30 days for conventional and 45 days for FHA. this will give you a better chance of getting your offer accepted.
If you have questions about bank owned properties, feel free to contact me!
Do you know how many bank owned OR short sale homes are on the market right now in Green Lake? 9 Active and 10 pending to close but haven’t yet – so now is your opportunity to put in a back up offer! Not all those short sale and bank owned properties are bound to close – espeically short sales since they can take longer to close. Buyers get antsy and walk away scotch free.