Since the Great Recession of 2009 there hasn't been much conversation focused on bank owned properties, foreclosures, HUD Homes, distressed properties, short sales and even the various types financing used to purchase these properties.
So why is this a relevant topic right now?
Recently, I received a phone call and the other person had questions on how to search for foreclosures and distressed properties and assumed the properties needed to be purchased using cash only.
What Are Bank Owned Homes & Foreclosures?
Bank Owned, REO (real estate owned), foreclosures and auction properties are terms used interchangeably to describe a property that has been taken back by the bank with the most common term being foreclosure. However, foreclosure is actually a process when homeowner stops making their mortgage payment and the lien holder, aka … the bank, retakes ownership and possession of the property. The lien holder then has the right to sell or lease the property.
Right now, Snohomish County has only 6 foreclosures and there are listed below.
- Darrington (1): https://www.barnettassociates.net/darrington/darrington-foreclosure-properties/
- Everett (1): https://www.barnettassociates.net/everett/everett-foreclosure-properties/
- Marysville (1): https://www.barnettassociates.net/marysville/marysville-foreclosure-properties/
- Stanwood (3): https://www.barnettassociates.net/stanwood/stanwood-foreclosure-properties/
Why does Snohomish County has so few foreclosures these days?
Snohomish County has very few foreclosures because the local real estate market has boomed and most homeowners have equity and are not in a distressed situation.
What Are HUD Homes?
HUD stands for the U.S. Department of Housing and Development and homes owned by HUD are commonly referred to as HUD Homes.
The purchasing process of a HUD Home is different than the above mentioned foreclosures and, being government, more cumbersome. A HUD Home purchase has to be conducted through the HUD website, the buyer's brokerage and agent have to be registered and approved to make offers through the HUD website. Thankfully the Team is able make offers on buyer's behalf and has previously sold HUD Homes.
Buyer's offer has to contain but not limited too: full legal names, address, driver’s license number, financing type, type of buyer (owner occupied or investor), and closing date. If buyer’s offer is accepted, HUD with then issue a written contract to be completed and returned within 3 days – pretty much overnight. The contract has to be completed correctly and if it's not, a buyer (and their agent) receive 2 chances to correct the contract but on the third incompletion/inaccuracy HUD cancels the contract and buyer/agent must start over.
What Are Short Sale Properties?
Short sales are a different type of property sale than a foreclosure or HUD Home. A short sale is when a property owner(s) is trying to sell the property for less than what's owed against it. For example: if a owner(s) has a $800k mortgage, or multiple loans against the property, and the homeowner lists the property for $600k then the seller is short the funds to pay the loan off from the sale's proceeds. This is why these properties are called Short Sales.
Being the homeowner is short, the owner needs to receive permission (we call it Third Party Approval) from their lien holder for the sale to move forward. Also, homeowners are likely looking for some sort of debt forgiveness for the $200k in the earlier example. Being third party approval is needed and the seller is looking for debt forgiveness, these sales take a long time. Should be called long sales since most people think short sale refers to time and not loans and selling price.
There is 1 short sale property in all of Snohomish County.
For the same reason there are few foreclosures is the same reason there is one short sale in Snohomish County.
What Types of Financing can be Used to Purchase Foreclosures & Short Sales?
Any foreclosure, HUD Home, or short sale property can be purchased using traditional financing methods. There are no restrictions yet there is a caveat. The property still has to meet the financing and underwriting guidelines of that particular program. For example, if a loan a zero down loan like VA and USDA then the home has to be nearly move-in ready condition. If the buyer is putting money down using Conventional and FHA then the buyer has more latitude in condition.
The buyer still has to qualify for the particular loan with a lender based on income, debts, etc.