What are the differences and what are the risks of properties being sold by Auction, Short Sale or Fannie Mae?

Auction properties are represented by Real Estate agents who are representing a third party on a property generally below market value. However the risks can be costly. You are purchasing an “as is” property which may have an underground oil tank with environmental issues, lead paint, flooding, mold issues or violations with the township. Many times the Realtor representing the auction company is not even aware of the extent of the problems. So when I say buyer beware I mean it. Several buyers’ agents are not experienced with the rules involved in these sales and there is an additional buyer’s premium that is added to your offer. Many times, investors or contractors take a gamble with these properties because they have the funds and skills in construction to absorb the risks.

Short Sale is when the homeowner owes more on the mortgage than what the house is worth. The homeowner remains in the home and puts the house up for sale with an agent. Offers are submitted to the bank and the investors that hold the underlying mortgages determine on their own time table and percentage ratio what they will be willing to accept. A short sale can be on the market for months or years depending how long the bank decides to hold on to the property while the taxes and liens accrue with further debt. The bank may sometimes arrive at a price by sending an appraiser to perform a BPO which means best price opinion. Often the appraiser that is sent may not know the area or the median price of like homes. This can result in the homes staying on the market or deteriorating even further from neglect. It can be very frustrating for all those involved in the deal waiting around for the bank to accept. Many times buyers will put in an offer and after not hearing a response for months, withdraw their offer and move on to another property. A short sale is not for a buyer who needs a home within a specific time frame which is another reason why these sales end up in the hands of investors coming in to rehab the property. After renovations, the homes are sold to buyers who prefer to purchase an updated home.

Fannie Mae is when the bank has purchased the property usually through a Sheriff’s sale and then puts it on the market with an approved listing agent. Generally, the bank will, at first, only offer the property to a buyer that will occupy the home which eliminates investors. They may decide to entertain several offers at a time before accepting or if they do not like any of the offers they can choose of their volition to keep the property on the market till a better offer comes along for any time period they choose. Sometimes they will even offer a buyer’s concession, agree to put a new roof on the home or give a credit for closing costs. However, this is not an obligation on their part, you are still purchasing a home in ‘as is’ condition, but generally the Realtor knows more about the property and may have a better idea of what the bank may consider. Generally, Investors only become acceptable to the bank when there are environmental issues, deterioration of the home is too extensive for an average buyer to purchase or if a prolonged time period has passed without any deal.

There are currently several opportunities to invest in the Real Estate market. To begin with, it is easier to buy a home from an owner who lives in their home even if it is neglected, represented by a Realtor. Generally, owners maintain their home. Other homes may be partially or completely renovated. In either scenario, it is a good idea to do a home inspection.

There are so many great opportunities to purchase right now. Why rent when you can own? Interest rates are still low. Speak to a mortgage broker find out what you can really afford, then call Nicole Idler of Friedberg Properties at 201-906-9338 to make home ownership a reality. If you do not have a mortgage broker I can give you many good referrals. Either way, with my extensive knowledge as a Realtor, I will do my best to negotiate a great deal for you.

By Nicole Idler