The goal of this post is to make you go, “Oh… alright then!”
There are four categories of homes for sale:
- Unapproved Short-Sale- a homeowner is said to be “upside down” on a home when the proceeds from a potential sale would be less than the amount owed on mortgage and lien balances. If they are unable or unwilling to continue making payments, they basically have two choices… try to petition the bank to eat the loss… or walk away. Short sales create slightly less havoc on credit ratings so homeowners have some incentive to cooperate. Here’s the problem: it’s “someone’s ass” at the bank if they sign off on the loss, so managers are often reluctant to do so. The official party line is usually goes like this: “we are so overworked with short-sale requests, we may take a few months to get to you”. And in fact they often do. A prospective buyer will make an offer… sit around for 2, 3, 7, 8 months awaiting lender approval… get their hopes up… get approved for their own financing… continue to waste money on rent payments… and in the end, most listing agents report back that the manager asked for a higher sales price… or just said no. Meantime the buyer’s own financing gets dated and they have to start all over again, so they often give up. My take: stay as far away from this category as you can.
- Pre-approved Short-Sale- up until recently, I put all short-sales into the category above… but alas, banks are starting to get smart. Once a short sale is approved, they actually move through the escrow process almost as smooth-like-butter as in the other categories. The downside is the short-sale approval price is mostly non-negotiable. The upside is the prices are usually set way low to begin with. But I still say let someone else go through the rigmarole of getting lender approval. You might ask, “Doesn’t this mean some other buyer will get the deal?” In my experience, the other buyer will get so frustrated after months of waiting, they will move on to greener pastures. Later, the smarter banks (doesn’t say much) get real and approve the sales price. A smart agent can distinguish which listings have been approved, though it is labor intensive. This category represents good value. I’m closing one this week for $240k… the original list price was $400k. No joke. [Well its been about a week or so since I wrote this post and we did end up closing this sale… but it closed a week later than expected. As mentioned I have been advising clients against making offers on short sales due to their extremely poor closing ratio… and while I thought the pre-approval would address these nightmares I learned a big lesson about one last step all short sales must go through that only luckily did not kill our deal. For more detail, see my revised take on short-sales.]
- REO- this category goes by many names (i.e. “bank owned”, “real estate owned”, “notice of default”, “NOD”, “notice of sale”, “NOS”, “public auction”, “tax default”, etc.), but they all mean the same thing. Usually these are short-sales that took so long in getting approval that never came, that the bank ends up foreclosing. Once the bank takes back ownership, it switches to a different side of their balance sheet. Then, the bank’s REO asset managers are empowered to get rid of the asset at very competitive prices once and for all.
- Re-Sale- good old fashioned homeowner looking to sell their home. Here’s what I have to say about this category… anyone looking to sell in this market… really has to sell, so do not preclude them from your search in the name of getting a “good deal”. Don’t miss the forest through the trees, and get sucked into the vortex of REO marketing spin.
“Oh… alright then!”
Bottom line: when it comes to helping people buy the right house, at the right price, and with financing that meet’s their goals… all at one point of accountability… I believe I am the best Buyer’s Advocate in San Diego.
Don’t just take my word for it… check out some testimonials to kick the tires.