Short Sales, REOs, Foreclosures and Pre-Foreclosures:" What Are They and How Do They Work?" Asked My Buyer......
If only there was an easy and accurate answer to that question, right? Usually we, as the Realtors, can and do help our clients navigate through a plethora of different scenarios in the buying process. It is one of the many ways we bring value to the transaction. We have been through many different situations before and from experience, can help to guide our clients through them. However, as John MacArthur states in his blog post, All that appears short....is not a short sale......, the situation is always different and there really are no industry standards regarding these types of sales. Each situation seems have it's own set of challenges, the biggest, as I see it, being the ability to communicate effectively with someone at the bank or asset management company that is both organized (meaning, for example, they do not lose the paperwork so you have to start over almost every time you call!) and able to make a decision in a timely manner. Whether you are representing the seller or buyer, this seems to be the place where everything stalls, or in some cases, even comes to a screeching halt! You would think, with all of the properties they need to get off their books that they would be motivated to not only review but also respond to offers in a timely manner so that this can be accomplished. But the sad and maddening truth is they usually do not!
I was fortunate enough to represent an excellent seller to work with on a REO property recently that actually had a contact I could pick up the phone and talk to, or email, and was able to get a quick response. This seller, with my help, was able to procure a contract within the first two weeks on the market, yes, even in THIS buyers market. We even had two competing offers for this property. It is amazing what we can accomplish when there is cooperation and communication! This situation was definitely the exception to the "rule". In another case I know of, there has been an offer on the table almost two months, that the lender has yet to respond to.....BECAUSE NO ONE IS ASSIGNED TO HANDLE THE SALE AT THE BANK!!! There was also a second offer as well, so they had two to pick from, but those buyers got weary of the wait and walked away. And that was a higher offer, too, that they lost out on by not responding.
So, my buyer asks me, what is a short sale and what is the process? After defining what a short sale is, which usually means they are selling for less than what is owed....we get to that maddening "process" part of the question. And my most honest and accurate answer is that if, as a buyer, you want to consider purchasing a short sale, REO, foreclosure or pre-foreclosure property, you most importantly have to have the luxury of patience and plenty of time.
*If you want to close on a certain date, this may not be for you!
*If you have to coordinate your selling and purchase closing dates so you are not homeless in-between, this may not be for you!
*If you have the type of personality where you get easily frustrated or like fast resolutions, this may not be for you!
*If you are not a risk taker, and let your real estate attorney explain this to you, this may not be for you!
I have put in offers for buyers that have been responded to in a week to a couple of weeks (this is the GOOD scenario), to as long as three months just to get an answer from the seller. You would not believe how thrilling it can be to get a "heartbeat" from the other side after so much time has passed! Do you really want to put your home search on hold for an indefinite amount of time while waiting for a response to your offer?
There are SO many GREAT opportunities in this market for buyers. This is the BEST buyer's market I have seen in 15 years, so do get out and buy! Short Sales, REOs, Foreclosures and Pre-Foreclosures are not the only "good deals" out there. We have an abundance of both motivated and realistic sellers to also work with that actually respond to an offer on their property and can even get to the closing table, sometimes in less time that it even takes for a lender to even respond.
I am not saying that you should not consider these sales, especially since they are a substantial part of our inventory today, not only in Mchenry, Lake, Kane and Cook Counties in IL, but thoughout the country. I am just giving a bit of caution. There really is no way, in my opinion, for the Realtors to standardize this process until the banking industry gets control of it themselves. In the meantime....let your personality and time frame be the key to if you should consider these types of properties and let your Realtor guide you through the buying process, so you can successfully get to the closing table in a time period that meets YOUR needs.