In today’s real estate market, we typically find three (3) main types of sales, plus several other less common types.
Equity Sale: This occurs when the owner of the home is selling it and still has equity available, due to the fact that they have owned the home for a long period or they made a large enough down payment to create equity in spite of the decreasing prices. These are often the least frustrating types and often offer the most benefits to the buyer, namely full disclosures, easier negotiations regarding repairs, and more direct communication for the listing agent. These sellers must price their property competitively with those shown below if they expect to attract buyers.
Bank Owned (REO): This occurs when a lender has foreclosed a home because the owner failed to make the required payments. In such cases the listing agent negotiates directly with a lender representative. Since the lender has never lived in, or maybe ever seen, the home they provide no disclosures and often sell the home exactly “as-is” without making any repairs. They also typically take away the buyer’s right to maintain an appraisal contingency as well as other benefits a buyer might enjoy when purchasing from an equity seller. If these transactions close after the agreed upon date the buyer can expect to pay per diem late charges. Occasionally the lenders will agree to a buyer credit to help cover closing costs of repairs. Lenders typically counter-offer with a long addendum that explains their position that is usually a “take it or leave it” proposition. These homes can be in poor condition if the owner damages it on the way out.
Short Sales: These occur when the owner still is on title but cannot sell the home for enough money to pay off the loan(s). They may or may not provide disclosures, depending on whether or not they still live in the property and the condition may not be good. When an offer is received the seller typically signs it because it he will receive no money when it closes. The lender then requires the seller to provide a hardship package that usually contains close to 100 pages of documentation to justify the need for such a sale. Once the lender receives the package it can take up to (and sometimes more than) 8 months to get an approval, during which time they verify the value of the property and negotiate the final settlement with the owners. The long waiting period poses potential risks to the interest rates and prices. These transactions can be very frustrating.
Estate Sales: These occur when the family of a deceased person sells their property for the estate. They can also be called “Probate Sales”. These are similar to an equity sale but may not offer the disclosures if none of the previous occupants survived. It is not unusual for these to involve delays due to the court involvement.
