| With a glut of REO properties on the market and so | | | | liens, or other liens, have already been satisfied at the |
| many short sales facing impending foreclosure, many | | | | foreclosure sale. If the loan situation for the home was |
| buyers are wondering, and are even confused about, | | | | a typical 80/20 loan with the primary lien holder |
| which offers a better investment opportunity. Many | | | | financing 80% of the loan and the secondary lien |
| agents have listed pre-foreclosure homes with the | | | | holder financing 20%, and the secondary lien holder |
| prospect of helping the owners avoid foreclosure, only | | | | claim disappears at foreclosure, one can see how that |
| to have the lenders refuse to cooperate, despite many | | | | occurs. |
| reasonable offers. This results in the foreclosure of the | | | | The conventional wisdom used to dictate that |
| home, necessitating reserve bids from banks to buy | | | | whenever a buyer could find a primary and secondary |
| back homes as collateral. The homes are then ran | | | | lien holder type of a situation, as opposed to a single |
| through the REO branch of the equation, which | | | | lien holder or both liens being held by the same |
| typically results in the foreclosing bank taking a fairly | | | | company, he was in a prime purchasing position. The |
| significant loss on the reserve price they bought it back | | | | market has revealed many situations in which the |
| for. Banks are commonly leaving willing and able | | | | lender in the secondary lien holder position has declined |
| buyers in the lurch while they decide if the offer is | | | | to accept a short sale offer that would net them a |
| acceptable to them or not, but buyers typically will not | | | | few thousand and opted, instead, to force the property |
| wait that long causing a dissatisfied buyer, a disgusted | | | | into foreclosure, in which they would most likely receive |
| agent and a foreclosure that could have easily been | | | | zero. Short sale buyers seem to be better of now, |
| avoided. The common advice from agents now is to | | | | with a lender who in exclusively on the hook for the |
| avoid short sales and just buy an REO property. The | | | | entire lien. The likelihood of having the offer accepted |
| advantages of this is that the buyer doesn't have to | | | | is much higher, now, in that instance, flying in the face |
| wait for negotiations between two lenders to see if | | | | of previous market occurrences. Not with standing, in a |
| their offer will be accepted or not. They simply have to | | | | short sale any lien holder involved always retains the |
| wait for the primary lien holder who probably | | | | right to deny any short sale request. With the thorough |
| purchased the property through a reserve bid to | | | | understanding of how the process goes, anyone can |
| accept or reject it. This frequently results in the | | | | see the real advantage lies in purchasing REO |
| greatest discounts as the amount of any secondary | | | | properties, and avoiding short sales. |