What is the difference between buying a Foreclosure, a short sale, an REO property or a standard Sale? If you are going to be in the home buying market, it is very important that you understand the difference between each type of sale.
All sales are not equal.
There is a huge difference between a Foreclosure and a standard sale.
When you buy a foreclosed property you buy the property on the courthouse steps, you have to bring cash or a cashier's check and you buy the property "as is" with all its faults and no repairs are made.
You do not even get a key to the property and if the tenant is still in the property you have to evict the tenant.
The condition of the property is your responsibility and you do everything at your own risk.
Buying a REO property which is commonly referred to as a bank owned property which did not sell at the foreclosure sale and the bank took it back.
In most cases the bank will clean the carpets or replace them and add repaint.
They will clean up the property to have some emotional appeal.
You are also buying a REO property "as is" and the bank will not make any repairs.
Most REO properties have gotten rid of the existing tenant and you normally don't have to deal with an eviction.
You accept an REO property" as is" with all its faults and they will not make repairs.
Many REO bank properties charge you a penalty if you do not close on the contract date.
They do not accept offers with contingency of sale of another property.
Check out REO properties very carefully as the sale price is usually close to the standard sale price in the area.
A Short sale property is another matter.
The seller must approve the sale on the standard form.
The offer is then transmitted to the bank for bank approval.
The bank sends out an appraiser to evaluate the property.
If the offer is within 10% of the appraisal price the bank will accept the short sale.
If there is a second trust deed on the property the bank offers the second holder 10% of the note amount to get their agreement to release the second trust deed.
Short sales can take up to 2 years to go through.
The difference is that sometimes the bank will pay toward a termite report and repair.
They usually do not pay for repairs.
When the transaction is approved the buyer may have to deal with the existing tenant.
Sometimes the bank will ask for a contribution to be paid by the seller, buyer, or agents.
Short sales can be a good deal sometimes when the buyer gets the property for a very good price.
From my experience, the best way to purchase property is through a Standard Sale.
You do not have to assume all the liabilities of a bank owned property.
The Seller will fix things that are wrong with the property and if the seller does not disclose all faults in the property the buyer can come back to the seller and request to have it fixed or take the seller to court.
In most cases a property that is sold in standard sales is better taken care of than a bank owned property.
In a standard sale you know up front when you will close escrow and can plan on a date.
Whenever you can, I suggest you try to find a regular sale and not deal with a short sale if you can avoid it.
It will make life so much easier.