Missoula Homes – Short Sales , REO and Foreclosure Homes
With changing market conditions terms like Short Sales, REO and Foreclosure have become every day terms over the last few years. Although our Missoula real estate market is up 16% in absorption from this time last year, these properties are not likely to go away any time soon. In fact we will most likely see an increase even as our market stabilizes due to the long turnaround times in the foreclosure process. Homes that are being foreclosed on now are homes that started the foreclosure process at least 6 month earlier and in some cases almost up to a year ago.
Since these properties are likely to be around for awhile it is important to understand that the difference is between a Short Sale, REO and a Foreclosure property and how it could affect how an offer is presented and accepted.
When owners decide to stop making the payments on their loan the foreclosure process or the banks process of taking the property back from the owner is started. In Montana it takes 6 months to complete a foreclosure and sometimes longer depending on the bank. After 6 months the home goes to auction on the courthouse steps. Most often the highest bidder at the auction is the bank trying to protect their investment. If the bank is the highest bidder the property becomes REO property or REAL ESTATE OWNED (Bank owned).
Sellers in foreclosure are often in distress and often price the homes aggressively to get them sold.
Short Sales are properties that are being sold for less and what is owed on the property. For example if $300,000 is owed on the property and you are purchasing the property for $275,000 you are asking the lender to take $25,000 less or shorting them from what is owed.
Many times lenders are willing to take a hard look at a short sales because in the long run, taking what they can get and closing the loan will save them money compared to the risk and legal fees associated with taking the property by foreclosure and putting it back on the market. Short sale is usually in foreclosure meaning that the owner has stopped paying on the loan. The owner still owns the property and the bank has started the process to take the home back.
What to know before you make an offer!
- To complete a short sale the current owners need to be active and have a vested interest in getting the offer through. Banks will need hardship letters and financials from the owner showing why they are requesting a short sale.
- Most of the time the price that a short sale is listed for does not guarantee that it is the price that the bank will accept. The banks are looking for offers and lower the price until they have an offer to look at. The bank will evaluate the price after an offer is submitted to determine if it will work.
- Depending on the Bank, the process can be long just to get a response from the bank.
- WORK WITH A REALTOR WHO HAS COMPLEATED THE PROCESS! There are many details that need to be worked out and working with someone who is just figuring out the process can be the difference between a great deal and no deal.
REO – Real Estate Owned
Properties that have been taken back from the bank are called REO properties. Traditionally banks do not want to be property owners so they will resell them in an effort to recoup their investment. Out of the three types of properties REO homes are the easiest to purchase. By this point the bank has an idea of what they will settle for and have committed to selling.
With each type of property it is important that you are working with a buyer’s agent to help you through the process. When you are dealing with Short Sales, REO and Foreclosures, the sales process is anything but cut and dry.
The trade off is that you may be able to maximize your value and purchase more home that you would be able to otherwise.
Happy Purchasing Missoula.