Establish these expectations early and surprises will be less traumatic to our clients.
Short Sales
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Buyers will have to wait many months to get an answer from lenders
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Buyers should expect to be in competition with other bidders and they should expect their bids to be revealed to subsequent bidders.
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Buyers will have to pay market prices less additional resale costs such as attorney fees (3-5%) and repair costs.
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Lenders will not fix or repair properties to a new mortgage companies standards. The buyers will have to pay for this.
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Sellers, lenders will not allow the buyers to go into the properties and make the repairs themselves. Buyers will have to hire licensed insured contractors.
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Buyers will have to pay back water, sewer, trash and condo fees in some instances in order to purchase the property because the lenders will not pay them and the sellers cannot pay these fees.
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Buyers should expect hidden defects in properties due to the lack of communication from sellers by means of disclosures.
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Buyers should expect delays at settlement time due to the lenders not being able to respond to settlement requests in a timely basis.
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Buyers should be prepared for the lenders to reject all offers or ignore all offers and let the property go to foreclosure.
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Buyers should be aware that additional second and third position lenders may not be revealed until later on in the process.
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Buyers should be aware that sellers may require buyers to undergo costly inspections prior to lenders approvals and this money may be lost.
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Buyers should be aware that properties may not be covered by hazard insurance and inspections and even entrance into one of these properties may create a legal risk.
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Buyers should be aware that typical means for financing real estate may not work with short sale properties and cash buyers may be the only way to buy many properties.
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Buyers should be aware that traditional sellers have reduced their prices to mirror REO and short sale values and that they can avoid these issues by buying from a non-distressed owner.
REO (Bank Owned Properties)
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Buyers should be aware that the properties most likely contain serious material defects
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Buyers should be aware that typical means for financing real estate may not work with REO properties and cash buyers may be the only way to buy many properties.
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Buyers should be aware that properties may not be covered by hazard insurance and inspections and even entrance into one of these properties may create a legal risk.
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Buyers should be aware that lenders may require repairs before financing these properties and buyers may find that they have no legal access to the properties to complete the repairs.
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In most instances buyers should be aware that they will have delays at settlement created by the lenders inability to deliver deeds and notices to title companies for recordation prior to settlement. In many cases this can take months to rectify.
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Buyers should be aware that through the foreclosure process all of the property sold at REO sales may not be properly deeded to the buyer and the buyer may have trouble financing the parcel and the buyer may take years to accumulate all of the land that they thought they bought.
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Buyers should be aware that traditional sellers have reduced their prices to mirror REO and short sale values and that they can avoid these issues by buying from a non-distressed owner.