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New Definitions in San Diego Real Estate - 08/29/10
Many buyers today say "We want a foreclosure list with foreclosure houses on it." But what does that mean? Are those houses somehow cheaper or better? These are merely words unless you understand the terms and definitions behind them. regarding this and other topics here are some definitions that should be spelled out for the buyer or for the curious.
For Sale by Owner: a seller who has chosen to sell his or her property without the assistance of an agent. Commonly referred to as FSBO (fizz-bo), the process is more common in some states than others. In some states a seller will find a buyer but hire a real estate agent to process the contracts for a reduced commission. In some states a seller may choose to hire an attorney for the same thing. For reasons all their own, they wish to work independently and should be respected for their decision.
Foreclosure: a protracted, lengthy process whereby the bank or lender takes the property back from the owner.
Notice of Default: the legal document filed at the county administration building against the property when the home is in default, typically after 90 days of no mortgage payment.
Short Sale: the process of a seller who needs to sell but can't get a price that covers their mortgage(s) and closing costs. If the sale won't generate enough proceeds to close the deal, the agent must beforehand talk with the bank about a short sale. This is where the bank is now part of the acceptance process of a deal and will decide how much loss they're willing to take to get the home sold and off the current owner's hands. Banks take a long time to decide and are reluctant to give anything away at this stage. Be prepared for a long wait, perhaps disappointment. Homes are sold in as-is condition more often than not.
REO: this is an acronym for Real Estate Owned, and this used to be called the bank department that managed the properties the bank had reacquired through a foreclosure process. The process starts with the notice of default filed and, in California, ends with a trustee's sale back to the lender (if no one else buys the property on the county courthouse steps). The entire process can take as little as four months. Often the process takes longer because of delays on the part of the bank.
REO Part II: Banks have departments that must maintain these homes, keep the lights on and keep the taxes paid. Banks cannot legally sell real estate directly to the public, so they enlist the services of a real estate broker to list the home for sale. Real estate brokers in turn with the REO manager within the bank to negotiate through an offer.
Short Sale versus REO: Big difference! If you make an offer on a home that is potentially a short sale, you will work with the seller and the bank, with the bank (or banks) being ultimately the decision maker on your deal. They are very reluctant to give the home away, so offer accordingly. Closely inspect the home before making an offer. These homes are usually the ones where deferred maintenance has piled up. Stuff you will be responsible for if and when you close escrow.
Buying a bank-owned or REO property may take an equal amount of time and angst, but the property will be vacant and easier to inspect. In fact, some banks will put a little money into prepping the home for a better sale for them: paint, handyman work, landscaping, etc. Homes are sold without guarantee because the bank has never lived in the home and is selling as-is.
Open House: touring homes for sale that are hosted by the listing agent or the seller in the case of For Sale by Owner. Enjoy your open house experience through Open House Genie!
Article by Open House Genie
Copyright 2010
Used, copied or quoted with permission only.