What is a "Foreclosure"?
When a homeowner defaults by failing to make payments on his or her mortgage, the bank or financial institution that holds the mortgage note may foreclose on the property. Foreclosure gives the legal ownership of a property to the bank,allowing the bank to recoup its investment. A foreclosure property is any property that has been through the foreclosure process. If reacquired by a bank or lending institution, it will then become a Bank Owned property or HUD house if it was an insured loan through FHA.
Top Will the bank be flexible on price? Will the bank make any repairs? What does "Corporate Owned" mean? What is a "HUD" house? What is a "Short Sale"? A ‘distressed sale’ is a catchall phrase for any home that is being sold under market value, and that is not typically, a normal real estate transaction. Examples of a distressed sale would include properties that are; bank owned, foreclosures, corporate owned, HUD owned, REO owned, auctions, estate sales, sheriff sales, short sale, pre-foreclosures, and any sale where Seller might be so motivated to sell, as to lose real money on the transaction. Much of the time these properties are sold “as is, where is” and require the acknowledgment of additional addendums.
What is a "Bank-owned" property?
A borrower with a mortgage from a bank or mortgage lender can't meet the payments, the lender forecloses on the property,and the lender takes ownership of the property. It becomes a bank-owned property. A month or two after taking possession, the lender will usually list the property with a preferred real estate agent. The agent sells it at market value as quickly as possible, with market value taking condition and other factors into account.
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Usually the banks are not particularly flexible on price until the property has been on the market for a period of time. Bank owned properties receive a current market analysis called a BPO (Broker price opinion), which is very much like any other market analysis. The listing is priced at what the bank perceives the current value to be regardless of the amount of the original purchase price. Every 45 days or so, the bank will re-evaluate price and market conditions and may make price concessions. With that in mind, the Buyer has little to lose by testing the Sellers out. Be sure and check the values carefully to get a feel for where to make an offer. Your Realtor can help you with this.
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In most cases they will not. Most distressed properties, including bank owned propertied, are sold “as is, where is”. This means that "what you see is what you get". Your offer will have a home inspection contingency that allows you a specified period of time, after offer acceptance, to have any and all inspections completed on the property. At the conclusion of these inspections you will decide if you still interested the property. You would provide the inspection report specifying the material defect to the property, along with a termination letter and request for your earnest money back. If termites or other wood boring pests are discovered, this is one issue that the bank is likely to treat. They would do this to protect their investment from further deterioration.
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Corporate owned homes occur when a company moves a family to a different area and the family being relocated is not able to sell their current home. In this instance the relocation company has provided a ‘buy out’clause. The relocation company will buy their current home and place into the company's inventory. These homes are often in better condition, and while still being sold at the lower end of market value, are not always an ‘as is’ transaction. An advantage of purchasing these types of homes is that you will have the opportunity to inspect the property prior to purchasing.
HUD houses are Housing and Urban Development foreclosures. The most common way a house becomes a "HUD Home" is if the mortgagor who was foreclosed on had an FHA loan. HUD then takes ownership of the property. Who can buy a HUD house? Any individual who can qualify for a mortgage or can pay cash may purchase a HUD home. However, owner occupants have first option when the listings first come on the market. After the property has been on the market for at least 2 weeks, investors can also bid. Owner Occupants must live in the house as their primary residence for at least one year and may not purchase another HUD home as an Owner Occupant for two years. Purchasers must use a broker or agent who is registered with HUD to place a bid on a property. We are one of the preferred brokerages and can help you to purchase HUD houses.
A short sale is a circumstance when a property is heading towards foreclosure. The owner is working closely with the bank to try to sell it prior to that event. As the lender and the owner are both eager to avoid a foreclosure. because it is costly to the lender and they don't want to be responsible for the house. The owners credit is more easily recovered with late pays, as opposed to a foreclosure. The process is; the property is first listed for sale, then the owner applies for a short sale package, completes the paperwork and sends it off to the loss mitigation department of the pertinent lender. Again,the property is sold 'as is'. The owner is responsible for removing all other liens before closing. These properties are often in better condition and the buyer will have access to a completed property disclosure.
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What is a "Distressed Sale"?
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During the tour we will expand on these topics, and address any additional questions you may have. In the meantime, we are also available to assist you via phone or email. Something on your mind? Lay it on us... Real estate is our passion, and if you've got a question, we'd be glad to put our expertise to work for you. Contact us.
