Short Sales, Auctions & Re-Po's, Oh My

It's a daunting task for the buyer who wants to take advantage of this market. Everything is on sale but it’s hard to know which property offers the best value. The first thing buyers need to know is the differences between the different bargain opportunities.

Let this be an introduction to the most common discounted options. If you'd like to know more, drop me a line or give me a call... I'd be glad to go over these items in greater detail. Let's get started with some background information.

There is an abundance of property that has made its way into the market in atypical ways. Some are homes that were started but could not be finished. Others are homes that have become unaffordable to the owner. Regardless of their path, these properties have arrived on the market and are usually offered for sale “as is” and at a rate below market price.

Now, what do you need to know before you decide to buy one? Let’s go over the basics.

1)      Short Sales- These are properties that have “gapped”. That is to say, there is a gap between how much is owed on the home and how much the home is worth on the open market. If the owner is unable to absorb the loss, there is an option to attempt to sell it for less. An agent markets the home; all offers are submitted to the bank. The bank decides whether to accept the offer or not. These homes are in “pre-foreclosure.” If the bank receives no offers worth accepting they may place the property up for auction or let it go to foreclosure.

2)      Auction- These are properties (sold individually or in bulk) that are placed on the market to be sold to the highest bidder. Potential buyers typically have a small window of time in which to review the properties and then place a bid for the option to buy. The winner of the bid typically pays a certain price plus a fee to the auction house. Auctions are part of a growing trend- more properties are beginning to be sold this way.

3)      Re-Po’s- These are “Real Estate Owned” (REOs) or bank owned properties that have ceased to be owned by the purchaser. Now the bank owns them. The seller is the bank. These properties are usually sold at a discount and in “as is” condition. As one may imagine, the owner who has faced foreclosure tends not to have sufficient funds nor the inclination to have maintained the home in a normal fashion.

Although these properties are typically offered at below market price, one must consider the caveats. Here’s a list of caveats:

·         Short Sales can take a long time. Offers may take several weeks or months to be considered. The bank may decide to accept the offer, however- if there is a second mortgage the second bank may not release the lien against the property.

·         Auction-goers need to avoid the “ebay impulse”. When buyers engage in bidding wars, they often purchase for more than the property would fetch on the open market.

·         Bank owned properties may require expensive repairs to become livable. Such costs may bring the actual price above that of existing homes.

·         BIG CAVEAT: Properties sold in these three ways are almost always sold “as is.” One needs to consider the final price... that is the purchase price plus necessary expenses to bring the home to acceptable livable standards.

I’m Chuck Willman. I help investors and first time home buyers discover properties in Arizona’s Phoenix metro area. I wake up each day looking for the best homes available. I also guide purchasers through the process of ownership... this I do at no charge to the buyer. You can reach me at 480.292.0600, or ... search the market at my website, AZVest.com. There you can look through homes both new and existing.