Fort Lauderdale Real Estate | Foreclosures | Bank Owned
One of the questions I get asked the most by buyers is the difference between a short sale and a foreclosure. I wanted to give an explanation of both of them. This article defines the foreclosure process. Foreclosures (Bank Owned, REO’s) are defined here and Short Sales are in another blog post. REO stands for Real Estate Owned.
Foreclosures, Bank Owned or REO
Foreclosures in our Real Estate market are sometimes referred to Bank Owned properties or REO’s. There all the same. Foreclosures happen when the owner of the property stops paying their mortgage loan and forces the bank or lender to go through the foreclosure process with the city or county. This process can take over a year to complete in some cases. To start the foreclosure process the lender must file suit on the property owner with the city. The law suit process with the city or county can take a very long time to complete depending on how long the city or county is backed up with their foreclosure process. Once the lender wins the case against the home owner with the city or county, then the ownership is transferred to the lender or bank and the property is now a foreclosure or bank owned (REO-Real Estate Owned) property. The first thing the lender does is order a BPO (Brokers Price Opinion), which is a market price analysis of the neighborhood. This BPO is what the lender relies on in pricing the property at market value according to the closed sales. The lender (bank) then hires a Realtor to put the property on the market.
One of the major differences between a foreclosure and a short sale is that the bank sets the price on a foreclosure. The price in MLS for the property is about what the property will sell for and in some cases above the MLS price if there are multiple offers. A short sale the realtor sets the price with no input from the lender at all. Mulitple offers are becoming the norm for most foreclosures (REO’s) with some going $10,000 – $50,000 over asking price.
Buyers of Foreclosures (Bank Owned, REO’s) should be aware that when purchasing foreclosures you usually receive an answer on your offer within days or a week and you can close on the property within 30 days for cash deals and 45 – 60 days for buyers with financing. Foreclosures usually have no warranties on the property, do not do any repairs and in some cases the properties are in need of a good deal of repairs. Appliances are usually missing from the kitchens, holes in the walls, air conditioners missing along with the copper wiring and plumbing. A good home inspector is recommended when buying any foreclosed property.
Dale Palmer is a Certified Distressed Property Expert (CDPE). I understand and can help with the short sale and foreclosure process for buyers, please feel free to contact me at 954-895-8999 or email me at Dale@DalePalmer.com