Purchasing a home in 2011 is different in many aspects than it was in 2003 when inventory was comprised of mostly equity based homes. Like the four seasons, the real estate market has changed to encompass distressed and bank/institution owned properties. This shift has resulted in a variety of purchasing methods and it can be a struggle to understand the method to their madness when negotiating. This blog post will share some of the items encountered when purchasing short sales, bank owned properties, Fannie Mae, and HUD Homes.
Buying Short Sale Homes
With a short sale there are typically three parties involved: buyer, seller, and a 1st lien holder (could be more if the owners took out a 2nd or 3rd mortgage on the property). The first step is negotiating the purchase and sale with the seller since the seller still has legal title to sell the property. After that negotiation the purchase and sale is then presented to the lien holder for approval, counter, or disapproval. Most sellers ask for 90 days to try an obtain lien holder approval. That is the frustrating part for buyers as there is usually no news until there is approval and such. The waiting time can be longer if there are more lien holders on the property. It appears that home on Federal has 3 lien holders which would make it a challenging short sale but things could have changed and it’s just the public records are behind.
Related Blog Post: Short Sales, Distress Properties, Foreclosures and REOs
Related Page: Short Sale Assistance
Buying Bank Owned & Fannie Mae Homes
Bank Owned and Fannie Mae have a very similar process. These institutions just use their own forms to conduct all transaction and usually require no changes happen to their forms. In addition to their own forms, the properties include the “As-Is” addendum and make take no responsibility to the condition of the property. That is why the Form 17 (Seller Disclosure) is never received and buyers are required to sign a waiver indicating they waive the right to receive a completed Form 17. As previously mentioned, banks and Fannie Mae are picky with agents changing their forms and transactions can be canceled due to the changes. The reasoning, if you can call it that, is the changes make it more for the person reviewing the file then they’re willing to put forth. The person (or board) reviewing the file finds it more work than necessary and they’ll wait for someone to buy it as-is per all their conditions. It is quite frustrating for buyers especially if there is a clause the buyer doesn’t like and/or if there are some home repairs. With that said if the repair is a financing condition then it is usually taken care of.
Related Page: Snohomish County Foreclosure Search
Buying HUD Homes
Buying HUD homes are the least lenient with form changes and when it comes to dotting the ‘i’s” and crossing the ‘t’s”. Initial offers are applied for online using a bid system which requires only a few fields. It is more time consuming to set up a Facebook account than it is bidding for a HUD home. After the bid is made it is approxiametly a 3 day waiting period to find out if the bid has been accepted; if there is no response then it can be assumed the offer was not accepted and can be resubmitted. There are no limitations on how many times a buyer can make an offer on the property so don’t fret if you don’t win the bid the first time. Upon winning the bid, HUD will send over documents for the buyers to fill out and sign and return within 48hrs. Included with the signed documents is a cashiers check for the earnest money otherwise the bid is subject to cancelation. They give the buyers of these homes no slack on timelines yet HUD doesn’t have to adhere to any time constraints. It is a terrible practice in my opinion. Another note worth item is: if something isn’t right or a mistake was made on the contract, the buyer has 24 hrs to return all the documents or the contract is subject to cancelation. When it comes to repairs, HUD operates in the As-Is condition unless the repair is a condition of financing.
Related Post: How to Search HUD Homes
Which is the Easiest Property to Purchase?
In my opinion, bank owned properties are the easiest as the institutions have higher degree of motivation to work with the buyers versus the others. Short sales, bank owned properties, Fannie Mae, and HUD homes can be a challenge they also are some of the best priced property available today. It is best to understand what you buying as to set the expectations of what is to come in the future as your purchase progresses.
Great points, thanks for sharing! There are some great opportunities out there for buyers in today’s market but every situation is different. They are not all great deals or “steals”. Even the seasoned investor or experienced buyer should find a “buyer’s agent” that will look out for their best interests and guide them through the process. A “buyer’s agent serves as a buyer’s advocate, advisor, negotiator and confidante throughout the buying process.
You’re spot on multiple accounts Dan! Bank owned, short sales, and HUD homes are not always the bargains they appears as many require a lot of fixing to bring up the property to liveable standards. Yesterday, I had a discussion regarding agency with a current client and and explained how having a buyer’s agent looks after his needs an interest as well as how WA is cooperating state and the sellers tend to pay the buyer’s agent commission.