Short Sales and REOs

Short Sales and REOs is a subject that I've written about before,  but I continue to get questions on the subject and some key rule changes have taken place or are in the process which will impact Short Sales. 

If there is any question about the importance of Short Sales and REOs.  I did a quick check of the 38 homes sold in June in Paso Robles.  Of the 38 homes sold,  11 were REO, 10 were Short Sales, and 1 was Probate.  That's over 55% of the market.  There is no denying, Short Sales and REOs are a key part of Real Estate in today's market.

A quick recap of the terms.  A Short Sale is any Real Estate transaction where the proceeds of the Sale (Sale Price) are not sufficient to cover all outstanding loans (Liens) and costs of the sale (Commissions, Escrow and Title Fees, Taxes, etc).   A Short Sale can proceed either by the Seller supplying additional Cash or the holder of any liens waiving their lien position (More on this later).  REO is an acronym for Real Estate Owned, bank accounting terminology for Real Estate which the bank owns or carries on it's balance sheet (not considered a good thing since banks make money on money not Real Estate).  

The problem is there are some unrealistic myths and stark realities of dealing with Short Sales and REOs.  I'll focus on realities and some interesting new aspects this issue and continue with more detailed exploration of whys next month.

 Shorts Sales have potential of yielding some good deals,  but remember.  Listing price in most cases is unrealistically low,  you can expect up to 6 months to close,  and most important your offer has to be accepted by both the seller and the bank.

 REO properties have excellent potential for good deals,  but remember.  You generally cannot negotiate.  Prices are take it or leave it.  You can expect to have greater expenses with an REO because Banks generally will not fix anything. 

Probably one of the biggest changes coming are from Fannie Mae.  Strategic Foreclosures have become a major problem.  That term is applied to situation where the homeowner has the resources to pay the debt,  but chooses not too because the debt is higher than the home value.  Fannie Mae is planning on instituting a policy that forbids a person involved in a strategic foreclosure from obtaining another Fannie Mae loan within 7 years.  Since Freddie Mac and Fanny Mae tend to correlate policies and these two loan wholesalers account for most non Federal guaranteed loans it can have serious impact on anyone's ability to borrow on another home.  The goal of the change is to encourage more Short Sales and Deed in Lieu.  We'll discuss more next month.

Real Estate ownership is an interesting subject much of which is based upon Old English law.  Real Estate ownership is about the owning of "Rights" to property.  Ownership rights are conveyed by the use of a document know as a Deed.  There are numerous types deeds used to convey rights in various situations.  Which of the following, in the strictest sense, is not really a Deed?  

	a)	Quitclaim
	b)	Grant
	c)	Trustee
	d)	Warranty

(Please visit http://www.pasostyleliving.com for the answer)

Real Estate Up, Down, and Around:

● Most Expensive Single Family Residential Property

The above properties are listed in the Central Coast MLS and may or may not be listed by  Home and Vineyard Real Estate Brokerage.  The presentation of this information is not meant to imply any advertisement of these properties. 

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