San Diego

[2by-or]

Are you more likely "good deal" on a REO rather than a Short Sale?

[jtmmm]

Yes, easier, quicker - though not quick. I just bought a REO and it wasn't easy. Almost all REOs need repairs and you cannot work these into a conventional mortgage. e.g. the bank owning the property won't risk someone getting hurt doing the repairs so you'll need to pay the extra points/higher interest on a usda loan as well as put down 150% on the estimated cost of repairs - when done/approved you get refunded the extra 50%. Took my loan 60+ days to close but it finally did. As for short sales unless you have the patience to wait 3/4/6 months or more on a bank that doesn't want to take too big a loss then forget it. And good luck finding a RE agent willing to deal with a short sale - it's not worth their time. Also be aware a lot of the banks want cash only asap. The bank I was buying the property from ignored my full asking price offer for over 2 months hoping they'd get a close cash offer. It's a PITA but it can be done and be worthwhile if it comes true. Just don't expect anything to go quickly - it took me 5 1/2 months to get the home from the time of my first offer to transfer of title and I'm still having the required repairs being done to close escrow. Good luck out there, it won't be quick/easy but if you have the patience you can get a good deal in the current market.

[xtine]

I'm confused.

Do you mean an FHA loan requires repairs?

Conventional loans shouldn't require repairs. That is surprising to me.

[Gecko]

Generally, I stay as far away from short sales as possible. The majority of the time its a crapshoot to get an offer accepted - as well as a long wait. Much better to get a foreclosure - most banks will pay up to $7500 in closing costs on a foreclosure property, offers usually accepted within a week, and escrow usually takes a much shorter period of time than on a short sale deal.

[2by-or]

Generally do banks accept offers for less on foreclosure?  (Other than closing costs?

Thanks for your help!

[Joz]

Yes.  A REO is sold just like a regular listing, except the owner is more determined to sell and will take a loss as long as it's on the market long enough to make it justified to the bank's investors/stakeholders.

[Schveimon]

I am looking at you for the first time.  We are interested in a second home in southern ca. and I just found your site.  I am going to your various pages, I just wanted to see what happened when I pressed reply.  You suggested I sign up.  I don't have a particular question yet.

[Instaclose]

Yes, a foreclosure is usually a much better deal.  This may change as I think Lenders and Servicers are getting wise to the fact that a short sale is will be less expensive to them even if they sell it for slightly lesser than what they might have got if it went to foreclosure. But as of NOW Jan/Feb 2009.

Problem is, since most of our mortgages are not portfolio, (meaning the bank that gave you the mortgage doesn't hold on to it, they sell it in what is called the secondary market) so this means that the current servicer who may or may not be your original lender is bound by rules in regards to allowing a certain number of "negotiated" mortgage settlements in their pool.  This number is roughly 3%-5%. Once that number is met, technically they are contractually obligated to let the loan go to foreclosure before removing it from the pool.  (this is currently a source of litigation)

Our company handles both REO's (foreclosures) and Short Sales.  Most of the posts I see here are dead on with regards to which one is usually better for the buyer.... REO's.  

As for buying a REO, most are going to need a little (or a lot) of work.  However the worse the property the better the deal for you.  I encourage all savy buyers to look into distressed properties.  There is a loan program called a 203k.  It is an FHA loan and one of the best lenders who offer this is Wells Fargo.  This is a fantastic loan.  The loan program finances ALL of your rehab costs plus the mortgage while the property is undergoing rehab.  

I suggest finding a property with the basic must-haves for you....  General Size, Location, Proximity to work, Safety, Good Neighbors, etc and then finding the most beat up REO in that neighborhood.  Most of these properties will be priced well below market and because of its condition you will not be competing with 20 other offers.

You stand to get the best bang for your buck with this strategy.

Good Luck,

Your friends at Instaclose