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home / Real Estate
Home Buyers 101 -- Part IV
Received article
Thursday, August 19, 2010
So far in the series, we’ve covered rate shopping, loan programs, down payment, credit score, loan to value, debt to income, and the purchase contract. In this final installment, we’ll discuss the various types of properties.
Equity Sale – This is the straight forward sale from a seller with equity in their house listed for sale. This is the kind of transaction that was most traditional in the housing market prior to 2008. A benefit in buying this type of listing is the owners have full information on the property and have maintained the home.
Distressed Property – Distressed property can provide you an opportunity to save money on the home purchase. You first need to know that distressed properties come in two “flavors”: (1) properties owned by banks and investors known as Real Estate Owned (REO’s), commonly referred to as foreclosed properties and (2) short sale properties, properties that have yet to become foreclosures.
REO – An REO is a property the bank has received through the foreclosure process and any negotiations will be exclusively with an asset manager of the institution charged with its disposition. The key point to know with an REO is the asset manager is charged with minimizing the loss the institution will incur. As such, while the asset manager is certainly motivated by selling the property, they are also charged with getting as much as possible for the property; they are looking at the net proceeds to the institution.
As such, you should not expect that you will be able to pay 50 cents on the dollar for the appraised value of the property. Also, expect that the property will be sold “as is” and this may mean that financing may be limited in scope as the property may be ineligible for some types of financing like FHA, VA, or USDA.
Short Sale – Short sale properties are offered by the current owner who now owes more than the property is worth. The owner is seeking assistance from the lender to sell the property for less than the balance of the existing mortgage(s). As a buyer, you will be negotiating with the seller but will also have to obtain the approval from their lender(s) to accept your offer. This process is generally more lengthy because of the negotiations with the seller’s lender(s) and can be complicated if there is more than one mortgage on the property.
There are many nuances to both the real estate side and the financing side of the situation. Enlist the services of a trusted licensed real estate professional and licensed mortgage professional to help you negotiate the best terms and conditions for your financial future.
You can visit Renee's website at www.reneegerke.com.
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Renee Gerke
Renee Gerke explains homebuying terms.
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