Buying Property in Today’s Current Housing Correction 

There are three distinct types of Sellers and each has its own idiosyncrasies.  Understanding the differences will help you decide what is best for you.  Bank Owned Properties often known as REO’s or foreclosures, Short Sales,often referred to as pre-foreclosure properties and the Typical Sellers who have their houses on the market because they have a need to move for all of the normal reasons.  Let’s take a look at all 3 and how they fit into your plans for a purchase. 

Bank Owned Foreclosure Properties: 
Price:  These are often the best prices of any of the houses on the market for many reasons that will become apparent as you read further.
Condition:  These properties often need considerable work due to the condition in which the previous owner left them or if they have been vacant for some time.  These properties are generally sold as is, it is important that you have the home inspected.  In order to do this, you may need to pay to turn on utilities.
Offers:  Your offering price, while it is important to the Bank, is not the only factor.  If you are a cash buyer, a buyer who is going for a small mortgage or you are willing to purchase the property “as is where is” (which is how most Bank owned properties are sold), your offer will carry more weight.  A Pre Approval Letter stating that you are qualified financially to purchase this property or proof of funds for a cash purchase is required.  It may take the Bank time to look at your offer, they can accept, counter or reject it. They may continue to seek other offers after you have submitted yours.
Acceptance & Closing:  While these properties may move quickly from date of your offer to closing, this is not an absolute.  You may need some flexibility on your move in date.  Plan on 30 to 45 days to close after the bank accepts your offer.

Pre-foreclosure Short Sales:
Price:  These properties are contingent upon a bank accepting your offer after the seller has accepted and signed their agreement on the price.  The bank will have to agree to accept less than is owed on the home.  Often these homes are well priced compared to other properties in the same market. 
Condition:  Goes from bad to excellent depending on how long the seller has been in financial difficulty.  Your home inspection will help you determine deferred  maintenance you will need to address.
Your offer:  As your offer is contingent upon Bank approval just like the foreclosure properties, a pre-approval letter with your offer is required.  Price is going to be important on this type of purchase since the bank will be discounting what is actually owed to them.  The amount you plan to finance is important.  The bank can be slow to answer even after the seller has agreed to your price as it is in their best interest to continue to shop for a better offer.
Acceptance & Closing:  The bank may take 60 to 120 days to respond to your offer.  Prepare to be patient.  Once accepted plan to close in 30 to 45 days.

Seller Owned properties:
Price:  While not usually the least expensive of what is on the market, they are usually fairly priced – just not priced as a distress sale might be.
Condition:  The majority of these houses are in excellent condition and show well as these Sellers are competing with properties that are distress sales and priced under market value.
Your Offer:  While these sellers usually have their houses priced according to the market, they are not in a position to play major negotiating games nor do they need to if they were priced fairly for the location and condition.  If you are used to dealing with foreclosures and short sales and making low offers, you may find that this won’t work for you with these sellers.  These sellers also request a pre -approval letter with your offer as well due to the mortgage issues that have arisen in this market correction.  They don’t want to take their property off the market if you do not qualify for a mortgage to purchase their house.  Some of these houses are sold as is, but many sellers are willing to make repairs that the buyer feels are important that are covered by the language of the contract.
Acceptance & Closing:  This is when you can usually be in the drivers seat if you have specific needs to close quickly & on time.  Sellers competing with distress sales can be more accommodating.

Make the choice
that works in your best interest.