There are many different terms for distressed properties being thrown around in our current real estate market in Arizona…short sale, pre-foreclosure, approved short sale, REO, lender owned, foreclosure. Many of our clients thinking about relocating to the Scottsdale area want to know…what does it all mean and what is best for them?
Well first, let’s define each property type.
Foreclosure/lender owned/REO – in Arizona, after a homeowner misses a payment, the lender can issue a foreclosure notice. This notice means that the home will go to foreclosure 90 days later. The property is sold through an auction sale where individuals, companies or the bank can purchase the property. In most cases, the lender will take back the property and will try to re-sale.
Short Sale/Pre-foreclosure– a short sale occurs when the lender/lien holder agrees to accept less than what is owed in order for you to sell a home. They agree to a discount of the mortgage debt owed.
Pre-approved short sale – a pre-approved short sale is one in which the selling price, terms & conditions have already been approved by the bank.
The waiting game- short sales usually take longer to close than a traditional sale. Short sales require complex documentation and lengthy dialog between the seller and the lender. This is because your offer not only has to be approved by the current owner, it also has to be submitted and approved by the lender that is taking the loss and possibly any investors or 2nd lien holders that might be involved. Every bank is different and every situation is unique so it’s difficult to define an exact time frame. Usually we are seeing short sales close within a 3-6 months. A foreclosure typically can close in 30-45 days from the accepted offer.
Disadvantages of short sales and foreclosure properties – short sale and bank-owned properties can be in disrepair thanks to extended periods of vacancy. Almost every property is to be purchased “as is” meaning you buy the home in the current condition. If you’re not willing or financially prepared to make repairs, these properties might not be the best way for you to go. And if the property is not in move-in condition, certain types of financing can be difficult.
Do I get to inspect the property first? – Of course! Although you would be purchasing the property “as is” you still have the right to a 10 day inspection period and to decide it you want to move forward with the purchase or cancel the contract.
We do not give legal, tax or accounting advise. Please consult with your attorney or accountant for more information.
Scottsdale’s Distressed Market – Of all the homes for sale in Scottsdale, 26% are short sales and 6% are foreclosures. Of all the homes sold in Scottsdale 20% were short sales and 22% were foreclosures.
Scottsdale’s average sold price per square foot –
- Traditional Sale – $181.39
- Short Sale price per square foot – $143.12
- Foreclosure price per square foot – $133.09