Every homebuyer would dream of purchasing a property for a very low price. Even if they know they can afford it, they will still find a way to lessen the cost. Savings can be obtained if they do this. It could also mean homeowners can increase their budget for their immediate needs.
When the real estate market was booming and the economy was still good, getting a low-priced top-quality homes was nearly impossible. Most sellers were in a good position to set their price high as the CMA indicates so. However, now that the tables are turned, house values are dropping and sellers are forced to lower their prices if they want their properties sold. Hence, this makes the current market condition an advantage for eager homebuyers.
Another reason why buyers become eager to buy properties is the foreclosure and REO sale. So what is the difference between the two? Find out below...
As home values dropped, increasing interest rates and the number of unemployed rose, more people have difficulty maintaining their mortgage. Banks started seizing their homes because of non-payment. As a result, lenders are opting to sell the property at a very low price just enough to cover their loss from lending. This gave rise to Foreclosed and REO properties.
Before properties become Real estate owned or REO, they usually undergo foreclosure first. This means foreclosure is a prelude to REO sale. In the event of delinquencies from a particular borrower, the foreclosure process begins. Lenders will seek the government's help to reposes the property and terminate the homeowner's right to redeem. The property will be sold through an auction, where the lowest bidding price starts at a value equivalent to the unpaid loan. This is a tough buying process because any interested buyer would have to top the bid of another eager buyer. It gets tougher when you are competing against investors who have all the money in the world to spend. The highest bidder can claim the property.
However, not all times will a certain property be sold at an auction. Sometimes, there will be no-takers. If this happens, ownership will be given back to the lender or the bank. This is now the time to call the property REO. The lenders will now be fully responsible for disposing the property and taking care of all the liens.
If you ask which one is a better deal, the answer is none. Both properties when sold can be in a good condition. Despite the price, still it may become expensive because of the future repairs waiting to be done.
However, REO may have its advantages over foreclosed properties. One, the borrower will take care of the eviction. Before the property is handed over, it is already vacant. Second, it is already free from lien. Lenders will negotiate with the other lien holders so that the new owner would not have to worry about any hidden claims. Third, papers for financing can be processed quickly since the sale; and the application for mortgage is handled by the same lenders. Lastly, buyers can negotiate prices. Unlike in foreclosure, you cannot demand anything from the court.
Between the two, REO may be safer and a more secure transaction than foreclosure auctions. That is, if you base it on facts. However, some people think there is no difference between them. Therefore, if you buy these properties, you still have to exert effort in researching them. This way, you know what to expect before committing to any transaction.
Learn more about real estate by visiting the following sites:
San Diego Community Blog and
San Diego community info.
