Did you know that when buying a home there are four types of different ownership and types of transactions? They are (1) Standard (2) Short Sale (3) REO/Foreclosure and (4) Auction.
When the ownership is “Standard” it means two things, (1) the person(s) on the title of the property own the property out-right meaning they paid their mortgage in full or have no mortgage; (2) the person(s) on the title are in good standing with their mortgage provider by paying their mortgage on time and the value of the property exceeds the loan amount.
When dealing directly with the owner when buying a home it tends to be the easiest of all four transactions but like anything involving money, it can be stressful because you are dealing with the emotions of the seller. The seller might be selling because they are moving to another state, or to live closer to family, might be downsizing or even because their current home is too small and need a bigger one. They have an attachment because of either good or bad memories. But it can also be financially beneficial to the buyer, because the seller can be in a position to assist the buyer with the cost of repairs and/or covering some or all closing cost. These transaction can close between 45 to 60 days depending on what source of fund the buyer uses to buy the home.
A home that is labeled as a Potential Short Sale, the buyer will be dealing not only with the owner but with a Third Party, which is the bank who gave the first mortgage or even the two banks who gave the two mortgages. There are times that a buyer can deal with THREE banks! A short sale means the value of the property is lower than the amount of the existing loan. A mortgage is when a bank lends you money to buy a home with the condition that the home you will be buying will be collateral or guarantee of repayment if you default from paying the loan. The property is under your name BUT the bank owns the home until the loan is paid in full. Catch-22 is that in order for the bank to re-sell the house to earn back what they lost, the property must have the same or better value of what the loan was originated for. So, if your mortgage was for $100,000.00 but the value of the home is $75,000.00, if the bank approves the sale of the house, the house is a short sale, not a “standard” transaction because the bank did not recouped the value of the original loan.
Short Sales usually happen predominantly because the homeowner can no longer afford the home or they have to relocate but they cannot sell the house at the price of the loan amount because the value of the property is lower. A Short Sale is for someone that has time to move because it can take up to 60 days to close on the sale.
An REO means Real Estate Owned or also called Foreclosure. These homes are owned by the bank that gave the mortgage but the owner stopped paying the mortgage and the bank assumed ownership. Remember, when you get a mortgage on the house, the “real” owner is the bank, not you. When the owner stopped paying the mortgage, the bank took back the house and the owners moved out.
The REO/Foreclosed homes are interesting, because you have no idea what is inside unless you look. These type of homes are sold “As-Is”, meaning the owner, the bank, will not make any repairs. For a first time home owner this is very difficult specially if they were approved to get a FHA loan. In May’s edition we will explain the different types of loans available to buyers. For this homes the owner must have a good amount of money saved in case there are hidden damages the buyer needs to fixed like a roof leak or structural issues. A REO/Foreclosed transaction will settle in 30 days up to 45 days.
You can also buy your home through an Auction. This houses are often sold site-unseen. The owner will not make any repairs and the highest bidder is the one that gets the home. These houses come available because the owner didn’t pay the county or city taxes, outstanding water bills and liens against the property.
Buyers need to be very understanding of these types of ownership and transactions because just because a house is cheap doesn’t mean that you are getting a deal because of the extensive amount of repairs you will need to make in the end. If you are not an investor with capital for the renovations, a first time homeowner should stay away from REO, Auctions and sometimes Short Sales.
For a detailed home buying presentation please contact Nathalia N. Cruz-Edmonds, REALTOR with the PS International Team of Berkshire Hathaway Homesale Realty by calling her directly at (410) 350-5848 or at the office (410) 583-0400 or via email at nathaliaedmonds@gmail.com. Please visit our website at www.pitinastucky.com for a list of our current listings. PS International Team speaks Spanish, English, French and Arabic.
