On a daily basis we are getting calls from home buyers looking for a “deal” on homes for sale in Marin. This could possibly be one of the best times to buy real estate in the last few years.
- Interest rates are at their lowest point since 1971
- Home inventory levels are high in most areas
- Home prices are down in most areas
In August, the median home price was $790,000 for a single family home and the number of homes sold was down 17% from August 2009.
So how do you find a deal and what constitutes a good deal? Finding a deal takes time, patience, and preparation. Many clients come to us asking about homes being foreclosed upon. So what is the difference between a short sale, a home for sale at auction and an REO?
Short sale- A short sale is a home being sold for below what the current seller owes on the property. The seller does not have other funds to make up the difference at closing. If the lender agrees to accept an amount less than the outstanding mortgage as satisfaction for the debt, the sale is considered a short sale. Short sales can be “good deals” for the right buyer–one who has patience and time. Short sales can take 120 days or even longer! If you don’t have a lot of time, short sales are not for you.
Auction sale- After a property owner has been been given a NOD (Notice of Default) a sale date will be set by the lender, whereupon the property will be auctioned at the courthouse steps. If no one purchases the property at the auction it is then owned by the bank and it’s typically listed for sale through a REALTOR®. Buying property at auction can be a risky process, as you are purchasing that property with any outstanding liens and there is no time for inspections. Buyers are unlikely to know the true condition of the property.
REO- (Real Estate Owned) If the home doesn’t sell at auction, it typically becomes an REO. An REO is when the seller’s lender has taken back title of the home (the bank now owns it) and is selling it directly through a real estate broker. REOs take considerably less time than a short sale but they aren’t always as good of a deal. Most REO properties are sold close to fair market value and are sold “as-is” , meaning the bank typically won’t do a lot of, if any, repairs. Unlike an auction sale, buyers still have the right to perform inspections so they at least know the condition of the property before they buy and can get an idea of how much actual repairs will cost. Again, the lender is unlikely to pay for them. They are much quicker to close then short sales. If you are buying an REO, you are likely to need some cash reserves to do repairs after close of escrow.
What is considered a “deal” depends on your goals, how much time you have, how much cash you have, and what risks you’re willing to take.