3 Different Types of Real Estate Transactions

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Many times, buyers approach me and say that they want a deal. Some of these buyers think they can find a deal with a foreclosure or short sale. What is the difference between foreclosures, short sales, and traditional transactions?

First of all, foreclosures are when the bank takes back the collateral for the loan they made. The bank owns the property, which makes them real estate-owned (or REO) properties. When you put an offer on that property, you have to understand that you are negotiating with an institution. It’s not the same as negotiating with Joe Homeowner.

When you negotiate with the bank, you might find yourself saying, “Wouldn’t it make sense to do this instead?” Sure, it would make sense - but you have entered a different type of transaction when you’re negotiating with a bank.

The other thing to keep in mind when dealing with the bank is the statute of frauds, which means all negotiations need to be in writing. They may say they accept your offer but that doesn’t mean anything until you get the documents and sign the contract.

Short sales are anything but short.

When it comes to short sales, remember that they are anything but short. A short sale happens when the homeowner owes more on the home than what it is worth and they need to sell. In this case, the negotiation is with the lender. Say they owe $300,000 and the property is worth $200,000 - they have to negotiate with that lender for the difference of $100,000.

It’s summertime right now and hot as can be. I mention that because if you make an offer today on a short sale, it might be the middle of winter before you get an answer back.

Traditional sales are the easiest of the three. They do come with their own challenges, but compared to foreclosures and short sales, the buying process is simpler.

If you have more in-depth questions about these three transactions, give me a call or send me an email. I would be happy to help you!

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