If you had a choice between buying an REO or a Short Sale, which one makes more sense!? Let’s examine the difference between the 2 Sale Types to help you decide:
1) Time Factor: Short Sale are time bombs since the mere fact that the property is being sold as a short Sale does not mean that the foreclosure clock has stopped. If an REO has been on the market past 60 days it’s a much better deal since the bank wants to unload it fast and the Asset Management company is anxious not to lose their commission. the property has stayed on the market, the better the deal to acquire that REO at deep discounts since every one in the food chain including the Asset Management company will want to close the transaction before the REO is pooled into an Auction Tape and cancelled as retail listing.
2) Risk Factor: There is more uncertainty associated with a San Jose Short Sale than a San Jose REO. In case of an REO, the buyer is purchasing the home without any prior knowledge of the property history can be cured by inspection. But what can you do if your Short Sale owner decides to declare bankruptcy!? Also the lender could always reject your Short Sale offer.
3) Ownership: Main difference between a San Jose Short Sale and a San Jose REO is the ownership. An REO property has completed the foreclosure process and has been auctioned with no successful 3rd party bidder. That’s why the bank had to take possession of it and it’s now being marketed on MLS to retail buyers. In case of the Short Sale, the home sellers are still on title and they remain active as principals till the close of escrow.
4) Asset Management: With REOs, there is an additional entity called Asset Management companies retained to manage the day-day interaction of the REO listing agents. After all, banks can NOT be bothered with such tasks a Trash Out, Re-Key and Evictions. The mere fact that as a buyer you are not negotiating with the sellers directly has it’s own implications because the Asset Management companies are merely acting as gophers and have been give tight guidelines by the banks on the net value the bank requires on each asset based. In most cases, the banks will take a certain discount off the Fair Market Value of the REO listing based on how long it’s been on the market.
5) AS-IS: REO are sold with AS-IS clause and the odds of getting repair credits are hard. In case of Short Sales however, there could be additional opportunities to adjust the offer based on the condition of the property.
Despite these differences, REOs and Short Sales have one thing in common which is a lender approval. And that means your Real Estate team should be keen on listing for the right clues from the banks Short Sale negotiators or the Asset Manager of the REO to find out when it’s a good time to steal a deal for their buyers.
Contact Us if you are in the market for a San Jose REO or San Jose Short Sale.