Budget Is Big But What Is Your Buyers Transaction TYPE

Dated: October 19 2016

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Budget is BIG but what's your Buyer Transaction Type???

More often than not budget is the main focus when it comes to buying a home. However, experience leads me to believe that just as important is transaction type. There are various types of transactions but gaining a clear understanding of your options helps.  Determining which avenue works best for you and your family's needs will eliminate a lot of hassle in the long run.

There are five basic TRANSACTION TYPES in home buying:

1.STANDARD

2. POTENTIAL SHORT SALE

3. FORECLOSURE

4. REO/BANK-OWNED

5. OTHER/UN-DISCLOSED

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Probably every agent's favorite...STANDARD! A standard transaction is the process whereby property rights in real estate and money is transferred between two or more parties. One party being the seller(s) and the other being the buyer(s). Closing may take place 30-45 days from date of contract. Motivated buyers and sellers can expedite this process through cash sales, pre-approved financing and a solid real estate team.


SHORT SALES/POTENTIAL SHORT SALES occur when a property is sold at a price lower than the amount the homeowner owes on the mortgage, and the homeowner's mortgage lender(s) agrees to the "short" payoff. A lender might accept a short sale with the property worth less than the balance of the mortgage, if the borrower cannot continue to make the monthly loan payment, does not have enough money to pay back the full balance of loan and needs to move out of the property. The seller's mortgage lender needs to thoroughly review a seller's short sale request. Gathering the required documentation and doing bottom-line reviews can take significant time to complete before a short sale is approved. Also difficult negotiations that take place between the parties involved, such as junior-lien holders and the seller, may delay the process.

  • The short sale process may take more time than a traditional retail sale to complete and it may be difficult to pin down a firm closing date until the seller's mortgage lender(s) agrees to the short sale. Junior-lien holders such as second mortgages, HELOC lenders and other special assessment liens may also need to approve the short sale. If a buyer is bound by a specific timetable to buy a home, the short sale may not be an ideal route.

  • There are many roadblocks which can derail a short sale. With extra research, a buyer should be able to uncover the possible obstacles and plan for them.

  • Buying the property on an "as is" basis.

  • The seller of the property will normally have to pay some money at closing or agree to an unsecured debt in order to have the short sale approved. If the seller refuses, then a short sale may fall through even if the seller has approved the sale.

  • The approving lender will rarely agree to pay for any extras that a regular seller would normally agree to. This could mean higher closing costs for the buyer.  The buyer will need to shoulder those costs. (For example, the buyer covers the cost for inspections and repairs).


If you’re a buyer considering a FORECLOSURE, be sure you’ve evaluated the advantages and disadvantages of this type of transaction first. Buying a foreclosure requires careful budgeting, the right real estate team, and the mental resolve to see the purchase through.The primary reason to consider purchasing a foreclosure is the potential for a great deal. The foreclosing lender typically doesn’t want to hold on to the home and may be willing to offer the property at a discount to get it off their books.Those willing to take the risk can use a home’s foreclosure status to their advantage, buying a larger property or in a more desirable neighborhood than otherwise possible. You’ll find foreclosures in every price range – from starter houses to luxury mansions – and occasionally the property is in great condition, ready for you to make it your home. In the best scenario buying a foreclosure is also financially advantageous since the price you paid is below market rate. If the value of the home appreciates and you decide to sell, your investment could return even larger gains.

Homes in any stage of foreclosure may require significant repairs just to make them inhabitable. Pre-foreclosures are typically assumed to be a better bet in terms of home condition, but don’t forget that a homeowner is in pre-foreclosure because the owners could not keep up with their monthly mortgage payments. This might mean that they also did not have the funds to perform regular maintenance on the home or repair serious issues that arose during their occupancy. 

Foreclosure is a lengthy process, so some properties have likely been sitting empty for months or sometimes years with little maintenance or care. The result is things like mold buildup, broken pipes, and vermin or bug infestations. Evicted homeowners might have sold valuable appliances or done deliberate damage to the home. Uninhabited houses can also fall prey to thieves and vandals.

While in some stages you’ll have the opportunity to inspect a foreclosure property prior to finalizing the purchase, these homes are typically sold as-is; that means no repairs can be requested as a contingency of the sale. When buying a home in foreclosure you might become responsible for any debt connected to the home. You could be looking at significant sums owed for unpaid tax obligations, construction loans, or home equity lines of credit. Take the time to understand the financial burdens you’re assuming above and beyond your mortgage obligation.

The process of buying a foreclosure property can be a long and frustrating one. Expect extra paperwork and slow response times. Occasionally it takes months to receive this approval. While lenders do want to offload the property, many are also trying to get top dollar. Understand that your contract may be canceled for any reason and at any point up to closing. If a better offer is presented it’s possible to lose the home.


When banks or other lenders offer mortgage loans they see them as an investment, because they will earn money from the interest on the loan. If homeowners do not repay their mortgages, banks lose money. To salvage their investment, banks foreclose on homes with unpaid mortgages and sell the properties at foreclosure auctions. If a home doesn’t sell at auction, it becomes a real estate owned property, or REO/BANK-OWNED property.

Once a property becomes an REO, the lender will prepare the house for sale, including removing the occupants, clearing liens on the property, and determining a price. Generally, lenders do not do any upgrades or repair work on REO properties, which are sold “as is.”

OTHER/UN-DISCLOSED sales can include bankruptcy and estate transactions. In some cases the seller(s) may just simply choose not to disclose the nature of the sale. There are pros and cons of course with these types of transactions, but there is always some level of risk involved when making a major investment such as buying a home. Depending on the true nature of the sale, closing time can vary. Keeping in clear communication with all parties will help any real estate sale in the long run.


Becoming clear on your Buyer goals and developing a realistic time-frame for your purchase will help determine your TRANSACTION TYPE... guiding you and your real estate team through the most effective strategies to satisfy your real estate needs. Be it FORECLOSURES, BANK-OWNED OR REOs the key to success in ANY real estate transaction lies in building REAL relationships!


For more information on Real Estate, Homebuying or HELP with your next investment reach out to our experienced, certified and professional Realty team at  THE MARK QUINICHETT GROUP.



WWW.THEMARKQUINICHETTGROUP.COM

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Andrea Washington

In addition to being a licensed real estate salesperson in MD and DC, Andrea is a Credit Repair Agent, certified Notary Signing Agent (underwriter appointed) and Investor. +Get connected to resour....

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