What is a Short Sale?

A short sale occurs when the mortgage company (bank) agrees to accepts a mortgage payoff amount that is less than the mortgage balance. When a mortgage holder falls behind on payments or is going to fall behind on payments and is unable to sell their house for enough money to payoff the existing mortgages, then a short sale may be an option that would allow the homeowner and bank to avoid a lengthy foreclosure process. For instance, I recently negotiated a short sale for a couple that divorced. Neither one could afford the house individually and they owed too much to sell it retail and pay an agent commission and closing costs. So, in order to avoid foreclosure I negotiated with the first and second mortgage holders to accept less. The total owed was $332,000 on a property valued at $335,000. The banks agreed to accept a $260,000 short sale as payment in full. Yes, in all of my dealings the homeowners moved after, and often before the short sale completed. When a bank owns a property then a short sale is no longer possible. The property is now an REO (Real Estate Owned) property. These properties are typically listed with a Real Estate agent and sold on the retail market. You can get great deals on REO properties, especially if they have been on the market for over 240 days

 

Many homeowners are not aware that a Realtor is the first person they should call. I can help you during this unfortunate time by offering a host of Professionals. I can act as a mediator on your  behalf,  in most cases, all compensation included in the short sale and paid by the bank.

 

If you think you may be in need or have any questions, please feel free to call Carolyn Barach 973-229-2851 or email me today!

What is REO (Bank Owned) Property?

When a property is sold through a foreclosure auction, its owner usually owes more to the lender than the market value of the property itself. This is often a barrier to selling the property, and sometimes such foreclosure auctions do not draw any bidders. As a result, not many foreclosure auctions end with the sale of the property, rather the title reverts back to the financial institution holding the lien. Properties in this category are referred to as REO (Real Estate Owned) properties.

 

After the bank takes possession of the property, the mortgage loan disappears and the financial institution deals with any items owed by the prior borrower, such as homeowner association fees. The financial institution also tries to get the IRS to remove any tax liens against the property. The current owners are usually evicted and often repairs are made to damage on the property in order to make it more attractive to potential buyers.

 

The best parts of buying a REO property are that buyers have significant leverage and may be able to turn the property around quickly, making money by speculating on above average returns. Banks are trying to get the maximum return when they sell an REO property directly. They want to sell them quickly for two main reasons: first, they don't want to tie up their money in capital reserves they are required to set aside for a foreclosed property, and second, the management of such properties is a headache they would rather not have.

 

However, banks are very sophisticated when it comes to managing REOs and foreclosures, often having a department dedicated to them. The selling process starts when a potential buyer makes an offer to the financial institution, which is gone over by its management. Often, the institution will make a counteroffer, and the buyer may respond with another offer. After they have agreed on the price, terms, and conditions, a contract for the sale can be made.

 

When preparing to make an offer, a potential buyer needs to look at what comparable properties in the area are worth, along with the cost of any needed repairs. Financial institutions usually sell such properties as-is, which makes the buyer's inspection even more important. If they discover damage that they did not anticipate, which the institution will not repair, they can then cancel the transaction.

Investors dedicate much to buying REO properties in terms of funds (often cash), work, time, and effort, thus the price needs to be far enough below market value to justify the risk. Foreclosures are properties that already have had problems that often include tax issues, a lack of maintenance, substantial repairs, and often needed improvements that cost a significant amount of money, and any investor looking to buy such a property needs to keep this in mind at all times.

 

Investing in foreclosures and [http://www.realtyopportunities.com/what-is-REO-property.htm]distressed properties is only as successful as the information you have available to you.

 

 

New Jersey Foreclosure Laws