Short sales are also considered to be "distress" sales, since they involve the loss of the home due to a financial hardship. In a short sale there are at three parties involved, the seller , the buyer , and the lender s , who must approve the sale and agree to take the shortage.
If there is more than one lender, they also have to approve the transaction. This further complicates and lengthens the short sale process. The advantage of a short sale may be the price, as short sales are usually listed below market value. The flip side is that it typically takes considerably more time to close than a bank owned or standard sale. Short sales despite the name typically take the longest time to close.
Much of the time involves negotiating with the lender s and getting approval for the sale. Also, there may be several additional costs involved, as any deficiencies must be paid off before title can be transferred. These additional costs have to paid in cash outside of the buyer's loan and the costs can be substantial. Remember also, that lender approval is never guaranteed! You may occasionally see a home listed as an "approved" short sale.
This indicates that the primary lender has approved the sale price for a former buyer one who may have "walked". Generally, the lender will still approve this price for a subsequent buyer, but this is not guaranteed. Therefore, "approved" is a bit of a misnomer. If the lender feels the market may have improved, they may order another BPO Broker Price Opinion, a type of appraisal on the property. If the BPO indicates a higher price, the lender will typically counter for the higher price, even if hey approved the former price before.
Please remember that the answers are generalities - There may be exceptions with individual sellers. Is OK paying market value for the home Wants a home that is in good condition Is asking for some concessions Wants a great price Wants to close quickly OK doing repairs or rehabbing, if needed Does not need to move right away and is willing to wait to close Wants a good deal Is OK doing repairs on the home Watch out for Seller not fulfilling repair commitments or doing second rate repairs, removing items that were thought to be included window coverings, certain appliances , moving damage.
Lots of extra costs, like pay-offs to 2nd TDs, delinquent property taxes and HOA dues these costs must be paid outside of the loan. The buyer may be asked to help to pay part of the short sale negotiator fee if the listing agent is using one. Standard sellers almost always "pad" their list price. Many do so to test the market in order to see what they may be able to get for their property.
With sellers, time is often the critical factor. Generally speaking, the longer the property sits unsold on the market, the more motivated they become and the more they will be willing to lower the price.
With that, a low offer on a home that is new on the market is not likely to succeed. Standard sellers will simply wait for a better offer. They do get discouraged over time however, and a lower offer on a property that has sat for several months may have more of a chance of success.
Offer close to list price if the home is new on the market Offer lower than list if the home has sat on the market, especially for an extended period Ask for repair credits or additional concessions to help "sweeten" the deal.
Lenders are very anxious to unload REO homes form their portfolio and as such, they are generally priced to sell. Because of this, buyers should be aware that many REOs receive multiple offers.
Buyers may find themselves in competition with other buyers, so they should be prepared to bid aggressively or look for additional home choices. REO sellers will prefer a cash offer over an offer with a loan because a cash buyer can close quickly plus has no loan contingency.
REO sellers will not generally accept an offer that is contingent on the sale of your home. Make an offer that is lower than list but still reasonable don't "low ball". Be prepared for several counter offers. Act quickly, as REOs are competitive. Short sales. Remember that short sales are always uncertain - There is always the possibility that the lender will reject the short sale and will simply foreclose on the property.
With that, it pays to have additional options. Many buyers prefer to place offers on several short sales at once with the hope that one will get approved sooner than the others. While this strategy may be frowned upon by the real estate industry, it is nonetheless common practice by many buyers.
Find out if the list price is a "teaser" price by checking "comps". Make your offer according to the above. Also, get your offer in quickly, so that your offer will be the one that the agent submits to the lender. During the lender submission process, continue to view other home possibilities and make additional offers. Be prepared to wait, even if your offer has been accepted and has been submitted to the lender s.
Here are some of the other types of home sales. Auction Sale. The property has gone through the foreclosure process and is now being sold at a public auction, usually through a web site. Very often, the list price is merely the auction opening bid , so the price can be very miss-leading.
It very typical for the price to bid up quite a bit higher than list price, so use caution. Occasionally, some real estate agents also hold their own "auction" on a standard sale property, in an effort to attract a lot of buyers.
They will often state that buyers are to fill out an offer form, and highest bids will then be contacted to fill out a purchase agreement. These types of auctions are really just agent schemes to create buyer frenzy and to get buyers to bid much higher than they normally would, Be carefully of being lured into one of these promotional auctions. Probate sale. This is the sale of a property in which the owner s have died and the home is being sold be the former owner's successors.
It is similar to a standard sale, with the exception that a special probate purchase agreement must be used. There is also a court date set during escrow to confirm the purchase and to possibly provide an opportunity for the sellers to entertainer higher bids on the property. The court process could require 60 days or longer to complete during escrow, but overall, it is similar to a standard sale. One note - Find out of the sale is subject to court over bid.
If it is, other buyers may appear at the court hearing and put in higher bids. Corporate Owned sale. This is a sale that is similar to a Bank Owned sale. In a Corporate Owned home sale, the original owner has accepted a buyout from their employer. The owner is usually a relocation company who has been hired to sell the property. Corporate Owned sales often have sales addendums similar to Bank Owned sales. These addendums may request an expedited contingency period, an "as is" sale etc. HUD home sale.
HUD is the property owner and it is offered as a bank owned sale or REO property to recover the loss on the foreclosure claim. Court house foreclosure sale. This property has gone through the foreclosure process and is now being sold at a public auction, usually through a web site. Few properties are ever sold at auction, with the majority returned to the lenders to be sold later as an REO. The reason for this is that they are often priced over market price, due to the amount owed on the loan.
Second, purchasing at auction requires all cash, or a cashier's check, for the full amount of the purchase. Because of this, many of the homes sold at auction are purchased by investors with the intent to re-sell or "flip" the property.
Related links. All rights reserved. Bookmark this page. What are the three primary types of home sales? When deciding how to list your home, there are two conventional sales options — selling for sale by owner FSBO or with a real estate agent — and a few alternatives.
Be ready to negotiate escrow timelines, juggle contract paperwork, and consult an attorney to make sure all forms are filled out correctly. Knowing the ins and outs of the process is especially important if you need to sell your house fast. The upside to hiring a professional real estate agent is that they know what it takes to get a house sold quickly in your area. If you want to completely bypass the preparation it takes to sell your house in a hurry, consider these alternative strategies:.
According to the Zillow Group Report , 21 percent of sellers said that their biggest challenge was selling within their desired time frame. One thing that can really speed your selling process is pricing your home competitively.
You may even want to price your home a little lower than comparable homes in your area to drum up interest and cause a bidding war. The effectiveness of this strategy depends on the state of your local real estate market and how homes are selling in your area. When setting a price, you also may want to consider the price points that the majority of buyers search for within in your area. The amount you discount can be decided later, because it might change based on feedback you receive from home tours, but you should at least have a date in mind.
The longer your home is on the market, the lower your odds are of selling it for listing price. You may also want to invest in a few minor upgrades that will make your home show better:.
After all, making a good first impression with buyers is crucial. According to the Zillow Group Report , 48 percent of recent buyers said having the home staged is extremely, very or somewhat important to their home-buying decision. And 29 percent of sellers said that landscaping their yard was one of their pre-listing activities. Staging helps define spaces and makes rooms look larger. For sellers who want to juice their profits, the usual suspects will do: a fresh coat of paint, organize, minimize clutter and do a deep clean.
In the hierarchy of home offers, the cash offer is at the top. Cash simplifies the buying process. The downside of cash buyers is that they might try to negotiate more than someone who is financing the purchase. Beyond how the buyer is paying for the house and even how much they offer, experts agree that sellers should pay close attention to the terms of the sales contract. If a buyer builds in terms commonly referred to as contingencies that allow them to back out of the deal when specific criteria are not met, then the seller could end up empty-handed.
Evaluating the terms is more important now than ever. Nobody wants to leave money on the table when buyers are lining up to pay above the asking price. But sellers should keep a cool head when it comes to pricing their home. Every additional buyer for your home can be an additional profit so maximize with a real-time strategy. Natalie Campisi is a Los Angeles-based reporter who covers mortgages and housing news for Forbes Advisor. Previously, she was the senior mortgage reporter and analyst for Bankrate.
Select Region. United States. United Kingdom. Natalie Campisi. Forbes Advisor Staff. Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.
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