Distressed Properties - The "New Model" of Buying and Selling Real Estate

The numbers are staggering. By the end of 2009, RealtyTrac reported approximately 2.9 million foreclosure fillings across America. That is a 21 percent increase from 2008 and 120 percent increase from 2007. This equates to 1 home in every 45 and distressed properties account for nearly 40 percent of all real estate transactions. In the next few years it appears the “storm” will continue. That is the bad news.

The good news is the housing market is showing some signs of improvement. Since most housing markets are “localized”, these numbers are not as devastating in many areas. By the end of 2009, the Wall Street Journal reported a 25 percent decrease in the number of foreclosures. A major banking indicator showed a slight decrease in mortgage delinquencies.

The traditional model of buying and selling real estate is a thing of the past. Today’s model consists of all types of distressed properties; such as REO’s, short sales, pre-foreclosures and bank owned homes. It is essential that you hire a representative who knows and understands this new model of a real estate transaction.

Many banks and lenders play an important role in the “approval” process of an offer between a buyer and seller. Emotions that buyers and sellers experience when negotiating a contract have gone out the window. The lenders do not care if this is the perfect home for your family or if you have a friend from high school that lives down the street. Lenders evaluate one thing and one thing only; how much they will net from the sale, based on your offer.

The banks and lenders have specific guidelines when presenting an offer. As a buyer, be sure you follow these guidelines to the letter. If the lender asks for certain documents to accompany your offer then be sure you submit those documents. All offers in today’s market require the buyer to be pre-qualified or pre-approved for at least the amount of the mortgage. If you are paying cash for the piece of real estate, then you must submit supporting documentation that the “cash” is readily available.

It is also in the best interests of a buyer to abide by the terms of the offer accepted by the lender. If you are paying cash, but decide to finance the transaction a few weeks later, this drastically could affect the lenders original decision and cause a breach of the contract. If a closing date is agreed upon, then do your best to accommodate this close of escrow date. Many banks and lender are charging the buyer per-diem penalties for not closing on time.

All offers on “distressed” properties usually require an “As-Is” Addendum. This basically states the lender is not willing to make any repairs to the property. Do not let this deter the buyer’s decision to make an offer. Depending on the outcome of the home inspection, the buyer still has the right to ask for repairs. Some lenders might acquiesce or possibly negotiate a reduced sales price.

Distressed properties are going to be the “new model” of buying and selling real estate for quite some time. Be sure your representative has a thorough understanding of the process and is willing to educate you, the buyer, every step of the way.

Distressed Properties - The "New Model" of Buying and Selling Real Estate