Daytona Real Estate » REO

Customer Question: What is the Difference Between a Potential Short Sale and Bank Owned

David Byrne — Mon, 27 Dec 2010 17:39:51 +0000

What is the Difference Between a Potential Short Sale and Bank Owned?

We deal with a lot of customers and we get a lot of the same questions. This is one that’s asked often.

A bank-owned/REO (Real Estate Owned) property is one that has already been foreclosed on by the bank. The price is what they determined the market value to be and then it’s decreased by whatever formula that particular banks uses to procure a quick sale because they’re not in the business of owning real estate. The price is negotiable, but if it’s Fannie Mae or Freddie Mac (both government owned banks) they typically will not give more than a few percent off the asking price.

A short-sale is a whole different animal. The price you see on those can be rather arbitrary unless it has been approved by the 3rd party the holds the lien on the property for the mortgage. Basically what happens is a property has a mortgage on it that is more than what the property is worth and the owner, or seller, puts it on the market for less than the amount they owe and attempts to generate an offer.

Once an offer is received it’s passed on to the bank for approval to determine if they’re willing to take less than the loan amount to get the property off their books and avoid a potential foreclosure. This can be a time consuming process, sometimes taking more than 6 months. Our experience is that the best deal come from short sales, but it takes a lot of patience. Most often the outcome is a counter proposal from the bank. Example, seller owes $200k, property is worth $150k, buyer offers $125k. After going through their review process the bank will either completely reject (unlikely), accept and add stipulations, or counter, probably closer to the $150k value.

On foreclosures, banks can be pretty aggressive in setting their prices. I’ve seen bidding wars on several properties with my buyers. Sometimes the bank will say present your best offer by a certain deadline and then select the best. On short sales, it’s a bit like of Wild West. Since there is no set price, only what the seller and real estate are guessing the bank will accept, many of my buyers make lower offers. Again, this is not a quick turn-around game. Short sales can take from a few days for a bank response to months. Many buyers will make multiple short sale offers on different properties.

I’ve tried to make short sales and bank owned homes a little clearer here, but it can be pretty complicated. I work with these everyday. I would be happy to talk with you about it more. Give me, David, a call at 386-566-4169 and I’ll be happy to answer any other questions you might have.

David Byrne is a Daytona Beach real estate real estate agent who specializes in condos, homes, short sales and foreclosures.

Daytona Beach Foreclosures Pages Updated

Lynn — Tue, 25 May 2010 21:44:38 +0000

Live Display of Daytona Beach Foreclosures Listings Added

We just updated several pages related to Daytona Beach and Ormond Beach foreclosures today. Current listings of foreclosures have been added to the following pages:

Daytona Beach REO Properties – This page has all properties in Daytona Beach that have been listed as foreclosure or Bank Owned / REO.

Ormond Beach Foreclosure Listings – All Ormond Beach Florida foreclosures are listed from the Daytona Beach MLS.

Beachside Daytona Beach Real Estate Foreclosure Listings – This page shows all the beach side foreclosure listings for Daytona Beach, Daytona Beach Shores and Ormond Beach including homes and condos.

We will be publishing more pages of listings of foreclosure properties over the coming days and weeks. We are also in the process of adding more community pages. We published The Trails Homes for Sale in Ormond Beach yesterday.

Check back often for updates. If you don’t see what you’re looking for, please give me a call at 386-566-7503. I’m happy to talk about any specific property or to discuss the market in general to help you determine if now is the right time to buy or sell for you.

If you want to see all the foreclosure, bank owned / REO properties available in Daytona Beach, Daytona Beach Shores, Ormond Beach, Port Orange, Ponce Inlet, Ormond by the Sea, Holly Hill and South Daytona, just look at the list below.

Daytona Beach Area Foreclosed Homes and Condos

FHA Changes “Flipping” Rules to Help Investors and Market

Lynn — Fri, 22 Jan 2010 16:36:29 +0000

FHA Waives 90 Day Rule for Investors Who Renovate and Sell

Properties purchased for renovation or repair by investors for resale were not eligible for FHA loans until 90 days after the purchase. As of February 1, that’s changing. The FHA is waiving the 90 day period for one year, starting February 1st, to allow investors to renovate or repair REO (real estate owned) and foreclosed properties and quickly resell them using FHA financing.

With FHA financing making up about 30% of all mortgage written today, we believe it’s important to keep you informed of changes as they occur. FHA loans are very attractive to both buyers because of lower down payment, credit requirements and closing costs, and to lenders because of government guarantees.

The FHA has been very active lately with rule changes and we’ve had a lot to report. Just a few days ago we reported on FHA Loan Changes that will make loans more expensive, especially for those with a FICO score under 580. Now, we see the FHA making more properties eligible for FHA financing.

There are also separate FHA Condo Financing Rules that restrict sales in many condo buildings, and new FHA Short Sale Polcies.

The bottom line to this change is that if you are an investor who is buying property for resale, the FHA has made it easier for you to sell the property by allowing buyers to use FHA financing without a waiting period. There are of course restrictions:

Only Arms length transactions are eligible. There can be no interest between buyers, sellers and others.
If the selling price is 20 percent or greater that the seller’s purchase price, documentation will be required by lenders to justify the price. A new appraisal will probably be required to support the higher price.
An independent property inspection will also need to be provided by lenders to buyers before closing.

Will FHA Loan Changes Help Daytona Beach?

Will this change to FHA loan requirements for investors help Daytona Beach homes for sale? It certainly can’t hurt and may help move some of the REO and forclosed properties that have been damaged and need extensive repairs to sell. Investors can get a quicker turn-around, saving them money and making it more attractive to purchase and renovate or repair.