Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a house or apartment. Additional questions welcomed to la@curbed.com.
CATEGORIES OF SALES
As a result of the housing bubble’s resounding pop, LA’s real estate market has become lousy with “distressed properties,” i.e. short sales and foreclosures. In fact, according to DataQuick, these days only about half of all home sales in Southern California can be categorized as “standard,” with short sales and foreclosures making up the other half. Ooof. But how do they differ? Here’s a quick primer.
*Standard Sales
In your normal, standard sale, the seller still has equity in the property. Barring unusual circumstances, these transactions can proceed very quickly. Other advantages over short sales or foreclosures are the greater opportunities for price negotiation, and the expectation of cooperation from the seller on issues such as termite damage or other repair issues and closing costs.
*The Long and Short of Short Sales
Short sales occur when a homeowner owes more on his/her mortgage than a property is worth, and can no longer make payments. Rather than foreclose on the property, the lien-holders agree to allow the home to be sold for a reduced price and take a loss on the transaction. So, the sellers get released from their debt obligation while avoiding a credit-ruining foreclosure; the lien-holders get to recoup at least some of their losses; the buyers pick up a bargain; and everything’s hunky-dory. In theory, that is. In practice, however, it’s anyone’s guess. See, unfortunately, there is nothing short about a short sale: Typically, mortgages on such properties are divided up between multiple lien-holders, and each bank or lender must approve every short sale offer, counteroffer, concession, et cetera. This process can drag on for months, with the distinct possibility of the sale falling through at any time for just about any reason. Oh, and even if your offer is accepted, the banks will usually require you to buy the home as-is and won't pay for any repairs
Bottom line, if you need to move soon, a short sale probably isn’t advisable. But if you have the luxury of time and an inordinate amount of patience, who knows, maybe you’ll turn out to be one of the lucky few that manages to score a short sale bargain.
*Foreclosures
?Whereas with short sales, the homeowner handles the sale of the property, in a foreclosure, a bank seizes property after an owner has defaulted on his/her mortgage payments. The home is then put up for sale at public auction to an all-cash buyer. If the home doesn’t sell at auction, it may be relisted for sale on the MLS by the primary lienholder. Foreclosures listed in the MLS are generally much quicker and easier to buy than short sales because you only need to secure approval from one lien holder, the bank, rather than track down a bunch. In the negative column, these properties tend to be in worse shape than short sales, and some require all-cash purchases.
*Probate Sales
Probate (or trust) sales typically involve the property of someone who has shuffled off this mortal coil. These sales are often straightforward, not much different than a standard sale. But occasionally, the listing will note that a court confirmation hearing is required. At these hearings, open, competitive bidding takes place, and bids are considered “unconditional offers,” independent of inspections, questions of financing, etc.
· Curbed University [Curbed LA]
Loading comments...