Three alternative real estate transactions for buyers
If you have worked on improving your credit and saved up a downpayment, you should be sittin’ pretty in today’s real estate market. The options available to real estate buyers are much more lucrative than in the past five years. While some real estate buyers are waiting for a definitive thud that will signal the market has taken its final fall, others are capitalizing on the abundant inventory in real estate markets throughout the United States.
While there are plenty of ordinary resale or builder transactions, there are a few different options available in the real estate market today. These are horses of a different color, but they might give you the most run for your money. Connect2Agent dishes below on three programs you might want to investigate.
1. Short Sales–These are properties that need to be moved quickly. Homeowners who sell their house on a short sale are in default of their mortgage and are nearing foreclosure. In a short sale, the mortgage lienholder agrees to accept a lower payoff on the homeowner’s mortgage. Homeowners who are selling their house in a short sale need to sell quickly, so they are motivated to accept a viable offer from a real estate buyer.
Take note: A homeowner who sells their house on a short sale needs to get the sale price accepted by the bank. Also, short sale homeowners often don’t have much money to make big repairs or give huge credits or allowances to real estate buyers, because they have limited funds.
2. REO (Real Estate Owned) Properties–These are properties that have already been foreclosed on and taken over by the mortgage lienholder. REO properties may be listed at auction more than once or they might be listed with a real estate agent. They could be in moderate to extreme disrepair. The price of an REO property is considerably less than the same type of house that is being sold by the original homeowner.
Take note: The time frame for the bank to acccept a real estate buyer’s offer can drag on for weeks. A real estate buyer who purchases an REO needs to add the cost of repairs and decorative improvements to the purchase price and weigh that against comparable houses in the local market before deciding whether the REO is a good investment.
3. Lease to Own Properties–This takes place when a homeowner allows the prospective buyer to rent the property with the option of purchasing it. This option is favorable for relocating buyers, first-time home buyers and buyers who have previously purchased but may have just recovered from a financial hardship.
In a well-drafted lease to own arrangement, there are two actual contracts. The first is the lease agreement between the prospective buyer and the homeowner. The second is the offer to purchase agreement between the prospective buyer and the homeowner.
Take note: Take special note of what monies from the paid rent and security deposit(s) will be applied toward the purchase price of the house. It would be wise to seek the counsel of a real estate attorney before you sign a lease to own agreement.
Seek the advice of a local real estate agent for current market values in your area when you explore these alternative real estate options. A seemingly good deal can quickly turn sour when based on a whim rather than sound market research.
If you enjoyed this post, you’ll want to read:
- Not all properties are created equal: What you need to know about defects in foreclosed houses
- Real estate agent gives four home rehabbing tips
- Do homeowners deserve to be foreclosed on?
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Posted by Rebecca D. Levinson