Which is better: Short Sale v. Foreclosure v. Bank Owned (REO)?…

It’s no question as to whether or not you’ve heard the recent buzz about buying distressed properties as either a Short Sale, Foreclosure or Bank Owned/REO, but do you really know what each of these terms really means?  And, are you educated enough about each to make a decision as to if pursuing a purchase of any would be the best option for you?

There is a lot of misleading, or shall I say, misunderstood information floating around on the various media outlets, especially including the internet and television -  about finding deals in “foreclosures” and “distressed sales”.  Well, sometimes you very well may be able to find a “deal” or good value in a distressed property sale, but you must weigh your current financial situation, along with your overall goals for your real estate purchase and decide if purchasing a distressed property is right for you.

To do this you’ll need to arm yourself with a few pieces of critical information.  I could attempt to re-invent the wheel at this point, but I’ve found a few really good explanations and overviews of these terms & this topic from other folks around the real estate world and at this point I’ll turn it over to them:

Article 1:  click here to read

Article 2: click here to read

Video/Article 3: click here to view

Article 4: click here to view

I hope you all enjoyed learning more about short sales, foreclosures & bank owned (REO’s) properties and the things to keep in mind about each.  If I can relay one important point to you today, let it be this: Do your due diligence very early if you plan on attempting to purchase any of the distressed property types mentioned in this article – whether it be as a short sale working with the seller and the bank, as a foreclosure/trustee sale at the courthouse working with a trustee’s representative or as a bank owned (REO) property working with a bank representative or more often a real estate agent working for the bank now owning the property – know what is required of you in each situation as a potential buyer and don’t let your emotions get the best of you.

Purchasing a distressed property and truly finding a great value for your investment is going to be a very tedious process that takes skill and diligence on your part, as well as the team of professionals surrounding you, such as your Realtor, Attorney, Accountant/CPA, Home Inspector, Appraiser, etc. in order to be successful in the end.  And remember, just because it is deemed to be “distressed” or “foreclosed”, etc. it doesn’t mean it’s going to be a good deal.

Let me ask you this: If you spend 6 to 12 months searching for just the “right property” and in the process spend several hundred dollars on each home you deem as a “potential great deal” for inspections and title searches, etc and you still have no property to show for it in the end, can you honestly say that the time spent and the potential deals you passed up that weren’t labeled “foreclosure” or “short sale” or “Bank Owned (REO)” were worth it?

I personally think the best deals are found by thoroughly doing your research of property values in areas you find desirable and then keeping a very close eye on properties that become available thru professionals such as Realtors and Auctioneers who are required to ethically & responsibly represent a property and all parties involved in a transaction.  If you have cash to spend or if you’ve completely applied for a mortgage with a lender and received a Conditional Pre-Approval (not a Pre-Qualification as this isn’t as strong as a Pre-Approval b/c they don’t make you provide W2 statements or tax returns and bank statements and income stubs, etc when applying to verify your financial situation) you’ll be in a good position to make a quick, but informed decision about a property that has just been listed or just had a significant price reduction, etc.  You’ll also very likely be ahead of the rest of the buyers in the market at that time.

This is when you have a good chance of finding a seller who likely has equity built up in the property to the point of where if they are seriously motivated to sell because of a job relocation or perhaps even a job change/loss they will be able to sell below “market value” without approving it with the bank or other third party.  At this time, you’ve found a “good deal” and purchased a home for below market value and if you’re working with professionals, like Realtors, Home Inspectors & Attorneys, etc. -  you can feel comfortable knowing that you can ask for advice along the way and all the way through and beyond closing when you seem to hit an un-foreseen “hiccup” and otherwise wouldn’t know what to do.

I honestly believe you “Get what you Pay for!” and that if you’re committed to purchasing a property for a very good value, then surround yourself with the best professionals you can get your hands on and use every bit of their experience and knowledge to help you determine if your purchase is indeed a good “overall value” for your money & your situation in the end.

PS – If you have questions about anything in the article above or would like to discuss these topics further please contact me and I’ll be happy to help in any way I can.