Follow U.S. Investment Immigration and U.S. Real Estate news: In the United States, a traditional property sale refers to a home owned by an individual who lists it for sale through an agent. In this type of transaction, the owner typically does not set the price too low, and if a buyer is interested in making an offer, there is usually room for price negotiation.
The owner of a bank-owned property (REO) is the bank. These properties are homes that were repossessed by the lender through legal proceedings due to the original owner's mortgage default, and subsequently handed over to an agent for sale. The bank's priority is a quick sale, so most of these properties are priced 5%-15% below market value.
A short sale property is owned by a current homeowner who cannot afford their mortgage payments. To avoid foreclosure, they may choose to sell the property as a short sale. For example, if they owe the bank $500,000 but the current market value is only $350,000, they hope the bank will agree to sell at a price close to $350,000 and write off the remaining $150,000 difference. Although the homeowner is the legal owner, the bank is the ultimate decision-maker regarding the sale price. Because these properties require bank appraisal and approval, the process takes longer. Currently, bank approval takes about 2-5 months, and in some cases, up to a year. The price of a short sale is usually similar to or even lower than a bank-owned property, but the final transaction price requires bank approval.
For foreign buyers, which type of property is most advantageous?
In terms of price, a short sale may result in the lowest final transaction price, followed by bank-owned properties, and then traditional sales.
In terms of time, bank-owned properties are usually the fastest, followed by traditional sales, and then short sales. The timeline for a short sale is difficult to predict because it requires bank approval.
In terms of property condition, traditional homes are owner-occupied and usually the best maintained. Short sales come next, as the owner is seeking the bank's cooperation and typically does not intentionally damage the property. Bank-owned properties are the most likely to have been intentionally damaged by the former owner out of resentment. Some banks may fund repairs, while others factor repair costs into the asking price. Not all properties are the same; there are poorly maintained owner-occupied homes, as well as bank-owned and short-sale properties in excellent condition. A crucial part of buying a home is selecting and viewing properties; you must see the condition of the property with your own eyes.
If you are a cash buyer, the most advantageous purchase for you is likely a bank-owned property. This is because banks are eager to sell and particularly welcome cash buyers, as the closing process is short and there is no risk of a loan being denied. In the eyes of a bank, a cash buyer may have a $5,000 or greater advantage over a financed buyer. This means a bank might be willing to sell to you for $345,000 rather than choosing another buyer who offers $350,000 but requires a loan. For a traditional seller, the choice is different; they would rather wait two weeks for a loan to be approved and risk the loan falling through than lose $5,000 in their pocket. In their view, the difference between a cash buyer and a financed buyer is only about $2,000.
