Long-time readers of this website almost certainly already are aware of the difference between bank owned homes and short sales in the Phoenix real estate market.
But for those who haven’t seen past summations, here’s a quick review.
On a bank owned home, the lender already has foreclosed on a given property and now is the owner of the home following an unsuccessful trustee’s sale. Lenders are motivated to sell these properties because the bank is absorbing the cost to carry the home (on top of the losses already realized through the foreclosure process.)
Negotiations on bank owned properties tend to be straight-forward, with a handful of exceptions to the norm – it often takes a couple of days to get a response from a bank (compared to 24 hours for a typical seller), the homes sell as-is and there almost always are lender-biased addenda added to the sales contract.
Also, negotiations beyond the initial offer almost always are verbal with a final contract being written after all parties have agreed on the terms of sale.
Contrast all of the above with a short sale. A short sale occurs when a homeowner owes his lender more than the property is worth. The sale is contingent upon the lender agreeing to accept less than what it is owed as a full payoff of the mortgage obligation.
With a short sale, the homeowner is the seller. In most cases the seller is behind on his payments but not always – someone who’s having to another locale, for instance, may have to sell when they otherwise would or could not.
Banks aren’t particularly motivated to agree to short sales, even though statistics have shown that lenders lose less on a short sale than on a foreclosure. Because of that total lack of motivation, it’s not uncommon for lenders to not respond to offers for periods of weeks or months.
List prices on bank owned homes reflect what the bank is willing to accept; make a full price offer with no conditions and the house will be yours (unless, of course, someone offers even more.)
List prices on a short sale have no real meaning in most cases because the lender hasn’t agreed to any sale price; lenders generally will not say what they’re willing to accept unless providing a yea or nay on a given offer.
Short sale list prices are set by the listing agent with the sole intent of soliciting an offer – any offer – so that the lender will commit to a sales price. In other words, what often seems like a good deal because of a low list price often is a mirage.
Short sales could be a good deal if you’re willing to wait a couple of months, but consider that the value of a property could be different a couple of months down the line compared to where it is right now.
If you do decide to pursue a short sale, you’ll want to do so on with eyes wide open … keep watching the current listings to see what other opportunities might arise. And if anything comparable to the short sale comes on the market, drop the short-sale offer and pursue the more attainable home.
Or keep waiting and hoping your contract is the one of 10 short sales that goes through.
[tags]Phoenix real estate, short sales, bank owned homes[/tags]