For today’s buyer, the Short Sale and REO – real estate owned property – transactions are the market heavyweights.
Let’s go a few rounds weighing the pros and cons to see how they compare!
Round 1 – Pricing (REO comes out swings and lands a quick over-hand right – perhaps)
The biggest and most powerful draw the REO property has on buyers is typically lower pricing when compared to other homes on the market. In San Jose lower prices have enticed so many buyers that, for the first time since 2005, there are more pending sales than active listings. However, there is no Tyson-like knockout because with lower prices comes competitive bidding which drives the price up to where the deal is, in many cases, not so hot. Case in point, we recently listed an REO on E. Duane Avenue in Sunnyvale and within 48 hours had 18 offers!
Round One goes to: The REO
Round 2 – Timeframe (Smelling blood, the REO goes for the knockout with a devastating left uppercut to the body!)
A huge complaint about the Short Sale is the uncertainty of outcome and the time frame – they take too long! There are Pending Short Sales right now that have been waiting for lender approval for over 9 months! The majority of REO offers can be ratified within 7 days and closed in 30 days. This gives the REO a huge advantage. Short Sale’s knees are a little wobbly at this point but somehow manage to stay upright. Why? Thankfully many major lenders have finally recognized the value of the short sale and are beginning to streamline the approval process. In the case of Wachovia Bank in Santa Clara County they are pioneering a program where the short sale approvals happen at the local level. They have staff that actually discuss and assess the situation with the homeowner. Their approval turnaround time – from offer submission to final approval - can be as timely as 5 to 10 days. In general, private parties are typically more nimble in their ability to respond and make decisions related to the transaction – far less “bureaucracy” in this process. Short Sale survives REO’s early barrage and is saved by the bell!
Round Two goes to: The REO
Round 3 – Disclosures (The Short sale has its Balboa moment…queue the horns)
As an REO listing agent myself, it amazes me that buyers and/or their agents sometimes don’t get it – There are LIMITED SELLER disclosures in a REO transaction. The seller is an institution – they have never lived at the property. They have never seen the property, much less know its history. Apart from the Natural Hazard Disclosures and a few mandatory disclosures, you have no idea what has happened to or around the home. This is where the Short Sale has a HUGE advantage. The seller most likely occupied the property and has a legal obligation to disclose everything they know to a potential buyer. Out of nowhere, Short Sale regains his legs and starts landing body punches to REO!
Round goes to: The Short Sale
This match is just heating up! Come back for Part 2 and see who will win.