FORECLOSURES: TIPS FOR BUYERS

Bank Owned properties are obtained through the foreclosure process. They are also referred to as REO (Real Estate Owned) properties. These properties can represent incredible opportunities in our little piece of paradise. It is not uncommon for multiple offers to be presented on properties that are priced aggressively. It is important to be able to have access to these listings to have the greatest chance to be able to make the "deal".

Websites are cropping up daily that offer you lists (for a fee) of foreclosure and "pre-foreclosure" properties. Driven by search engines that are triggered by public records, these lists are often inaccurate and do not give you current and accurate details about the status of a property. Once the foreclosure sale is completed, it may take the bank/lender and owner of the property time to clear the property through appropriate legal channels. It can take several months for an "REO" property to actually hit the market and be ready to sell. Banks and loan servicers are also not in the business of selling real estate. Due to the number of foreclosures nationally, entire departments have been created to adjust to the volume.

Most of the larger lenders have contracted with companies that specialize in preparing REO properties to be marketed. Prudential Coastal Properties is part of the SAM Network, (Specialty Asset Management), and I am certified to work with lenders using the SAM Network. Regardless of how the property gets listed and on the market, the key for buyers is access to these listings in a timely basis.

If you are considering a purchase of a foreclosure/REO property, keep these items in mind:

• If you will be financing the property, have a pre-approval letter from a lender. Most REO contracts with any financing contingencies require that a pre-approval be submitted with an offer.
• You are purchasing the property "As Is". While you will be able to inspect the property, it is likely that pricing has already been adjusted for the condition of the property.
• You will have a relatively short time to close, typically no longer than 30 days.
• Contingencies, other than a short financing and inspection period, will likely not be considered.

SHORT SALES: TIPS FOR BUYERS
Purchasing a short sale can be an effective means to buy a distressed property at an excellent price. However, if you are considering purchasing a short sale property, there are certain issues and details that you need to be aware of. A short sale is not for every buyer. Here are the major considerations:

• You're very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller's lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about four months. If there is more than one mortgage with different lenders, it can take six months or longer for the lenders to approve the sale.
• Your financing is in order. Lenders like cash offers. But even if you can't pay all cash for a short-sale property, it's important to show you are well qualified and your financing is set. If you're preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer whose financing is less secure.
• You don't have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property-or you need to be in your new home by a certain time-a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.
• Once your offer is approved, you need to be ready to close. While the seller's lender may take months to make a decision, once they do so, they will typically want the closing to occur within 30 calendar days.

Some of the other risks faced by buyers of short-sale properties include:

• Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer that is significantly lower than the fair market value of the home, chances are that your offer will be rejected and you'll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
• Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you've already negotiated, which may not be agreeable to you.
• No repairs or repair credits. You will most likely be asked to take the property "as is." Lenders are already taking a loss on the property and may not agree to requests for repair credits.

The risks of a short sale are considerable. But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.