First & Foremost you need to know as a home buyer that buying one of these repossessed homes take a great deal of PATIENCE.  Unfortunately, banks are not in  the “instant gratification” business.  We are so used to things happening fast. When an offer is made on one of these homes, it has to pass through MANY hands.  The banks are overwhelmed with work with so many foreclosures available for sale.  Because they are NOT in the real estate business, systems have not been streamlined to provide timely answers to home buyers. 

If you are right for it and do not have a deadline that you must make your move in, you can get great deals but it will take patience on your part, and tenacity on mine.  There is risk involved for you financially and a lot of work to be done when offering on a property such as this, and you need to be fully committed to your decision to buy and provide all documentation and sign all waivers needed.  It is risky, many of these homes are sold as is with no warranty and no disclosures.   Buyers for these homes sign many rights away.

Defining the Difference for you:

A short sale is when the lender is willing to accept less for a home than what is currently owed by the homeowner.  Across the country most real estate markets are feeling the pinch. Most sellers who find themselves in this scary position often think their only option is giving the property back to the bank and going into foreclosure. The Short Sale is a far better option for the majority of sellers, but may take a longer time for the bank to make their decisions on what kind of losses they are willing to take.  If the home owner has a first and a second mortgage, both have to be negotiated.  BUT in most cases, these homes will be in much better condition than the other challenged properties we will visit.  SO THEY CAN REALLY BE WORTH THE WAIT, and can take as long as 90 days to negotiate and close.

A bank owned home is when the home has been through the foreclosure process completely, it was financed with a conventional loan by the former owners.  Chances are this home has sat vacant for some time with no utilities before the bank bought back the home, cleared the title and listed it.  Sometimes as long as 12-18 months. Many times they need cleaning and repair.  Contrary to popular belief, the banks rarely negotiate a low offer on a home.  They list them at what they feel is an aggressive price and will allow them to sit on the market for months before reducing the price.  They rarely accept much less than full list price and may or may not pay some of your closing costs.

A VA repo home is when the home has been financed by the Veteran’s Administration.  VA loans have looser guidelines for credit and no private mortgage insurance.  They charge an up front fee for insurance on the mortgage when the home is originally sold.  This home too typically has sat vacant for many months with no utilities and chances are it is in disrepair.  The process of purchase involves a lot of special paperwork that I can acquire for you and response times from VA seems to be less in negotiations.  There is some room for price negotiation, but typically they too will not accept a “lowball” offer quickly as the homes are priced aggressively.

A HUD home is simply a home that was financed with an FHA loan thru the Federal Housing administration.  FHA insured the mortgage and has repossessed the home.  It too may have sat for many months with no utilities and be in disrepair.  There is an on line bidding process with a formula for successful offers.  You must work with an agent who is registered to do HUD bidding.  For FHA buyers there is currently a loan program that offers $100 down payment. However, $1000 earnest money as a certified check is required with paperwork that MUST be received by HUD within 48 hours of an accepted bid or the bid is cancelled. 

Corporate owned homes are homes that an employer has bought for one of their associates so that they could relocate to another area.  A relocation company is involved.  Many times relo will pay for customary closing costs and repairs needed after inspections.  Utilities are generally left on the the homes for the most part are generally in good condition.  A “lowball” offer will be considered and generally relo will respond within 10 days of an offer.  There is also a host of paperwork including liability waivers and property disclosures required stating that the relo company has no legal liability for the home. 

Your obligations in inspections include your putting the utilities in your name and having them turned on (except in short sale and corporate owned) prior to inspection.  If there are water or gas leaks, you will invest to have those repaired prior to inspections.  You can request those funds back from the seller just prior to closing but may or may not get that back.  If you do not go through to buy the home, you will not recover your investment to make the repairs for inspection. 

Your obligations with earnest money include that you are committed to the sale and have the financing to go forward.  Unless a problem that is catastrophic for the property like a HVAC system or roof needs replaced, many times the seller will not allow you to back out of a sale due to disrepair.  They are selling “as is” even though you are entitled and encouraged to inspect the home within 2 weeks of your accepted offer.  If you just change your mind or find another property that you like better, the earnest money deposit WILL NOT be returned to you. 

 Copyright 2/2008 by Vicki Owens, ABR, CRS, GRI, Andy & Associates, Realtors.  Direct: 614-440-5174 website www.vickihelpsu.com