 Short Sales and REO's? What are they? |
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What is a Short Sale Property?
A short sale occurs when a home owner is in foreclosure but before the property goes to public auction. Under a short sale, a lender must agree to accept less than the amount that is owed on the property. Unlike a foreclosure, investors typically buy the home for even less because investors are not paying off the existing loan nor making up the back payments. Investors are striking a deal with the existing lender to take less than what the lender has coming to avoid dealing with a foreclosure.It's a myth that lenders are not going to make a deal with an investor unless the seller has fallen behind on the seller's obligation to make timely mortgage payments. Sellers don't need to be in default for a short sale to occur.
What are REOs - Real Estate Owned?
Buying an REO is similar to buying a short sale except the property is already owned by the lender. The property was acquired by the lender through a foreclosure action. Often lenders will sell repossessed homes for less than the past loan balance. Bank-owned properties are called REOs, meaning real estate owned by the lender. Banks end up owning the property when nobody at the public auction bid enough to cover the amount owed against the property. REO homes are often considered the best way to buy a distressed property because the seller is already out of the picture. It's just the investor, the investor's agent, the bank and the bank's agent who are negotiating the transaction. |
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| Is now the right time to buy a home? |
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Home prices and interest rates are low and the government is shelling out thousands of dollars in tax incentives for first-time homebuyers. It seems like a great time to buy, but many experts agree, the American dream may not be for everyone.
Even with the economy still on shaky ground, Brien Peters of Haverhill is determined to become a homeowner. "I think that when I get into a home that I buy, I'll feel like I've made it," he says.
We first met Brien last fall when a low credit score kept him from qualifying for the best interest rates. With help from our experts, his score jumped 160 points and now he's ready. "I think now is the best time to do it," he says.
Financial planner Emil Ronchi says taking on a mortgage is a decision that Brien and every potential homebuyer should consider carefully.
"I think for most people, most of the time, it makes sense to rent," he says.
Ronchi points out that many Americans tend to spend more than they can really afford on a home. In 2007 the Census Bureau reported some 7.5 million homeowners were spending half of their income on housing.
Many homeowners rationalize the expense as a sound investment. Ronchi disagrees.
But Brien's realtor, Christina Tarpy, says low interest rates and the governments $8,000 tax credit make it an ideal time to buy for first-time homebuyers. "I think it would be crazy not to buy," she says. So do you take advantage of those incentives, or wait to see if prices fall even further? |
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Member Services
Realtor
2316 Orchard Parkway, Suite 200
Tracy, CA 95377
800-460-2288 (Direct)
800-310-6820 (Fax)
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