Today’s buyers will encounter four major types of property sales:
- “Equity Sale” or “Traditional Sale” – seller has enough equity in the home to close on the property and pay off any existing mortgages at the time of settlement. The seller is usually willing to make repairs as needed according to a licensed inspector. These transactions are taking 30-45 days to close when the buyer is borrowing funds to purchase.
- “Foreclosure” or “REO” or “Bank-Owned” – the previous homeowner has lost the property and it has been repossessed by the lender. The contract is “as/is”, meaning the seller (bank) will make no repairs. There are bank addenda the bank requires to be completed at the time of contract. These properties are typically priced below market value, sell very quickly under mult-bid situations and oftentimes above asking price. Buyers with cash, or a fully approved loan have a marked advantage in purchasing these properties. Once under contract, bank owned properties can usually close in 30-45 days.
- “Short Sale” – the seller or homeowner is experiencing a hardship and usually owes more on the home than the current market will bear. The home is placed on the market and when a buyer writes a contract it is presented to the bank for approval. The bank may or may not approve the short sale. Approval means the bank is willing to forgive the remaining debt, where the proceeds of the sale fall “short” of what is owed. The bank approval process usually takes 6 weeks or more (sometimes several months) and longer for the transaction to be completed. The short sale process can be highly unpredictable and it cannot be assumed the bank will approve the process. Even once under contract, a number of obstacles can occur that might hinder the sale. It is imperative the buyer has an agent that is educated and experienced about the short sale process. Also, these contracts are usually written “as/is” as the sellers typically do not have the money to make repairs. The sellers do not make any profit from a short sale.
- “New Construction” – the builder is selling inventory (already constructed) or a “to be built” home. Now that the housing market is in recovery, new construction contracts are on the rise. Many builders are offering incentives to new home buyers including paying closing costs and adding upgrades, etc. To the home. Having a real estate consultant represent the buyer in this type of property sale in essential as the builder’s sales associates are protecting their client, the builder. A buyer needs an advocate looking out for their interests as well!
- “By Owner” – very few homes are sold by owner and those that do go under contract often fall through. However, many sellers offering their homes by owner are willing to work with a realtor who brings them a buyer. Always let your realtor know if you are interested in a “for sale by owner” and they will look out for you as well as protect the transaction through to closing.