| Every time you read an article about REO, there is a | | | | 2) More complex negotiations and paperwork in short |
| sentence there that says not to expect the same | | | | sales Buyers are dealing directly with distressed sellers, |
| steep discount from short sales. They also add that | | | | and after that with bank representatives who are |
| short sales provide opportunities for higher profit | | | | hesitant to accept short sale deals because of the |
| margins and investors should focus more on | | | | deficiencies. |
| preforeclosures or short sales than REO's. | | | | Hence, it takes more time, and energy to get in touch |
| But in practice, more investors and home buyers | | | | with all the parties and get them to agree on a price to |
| purchase REO properties than short sales. And | | | | close the short sale deal. While in the REO process, |
| according to a leading foreclosure website, only around | | | | you only deal with the bank or its agent. |
| 10% of short sale deals actually close. | | | | 3) Trouble reaching an agreement between Second |
| So what is turning buyers and investors away from | | | | and First lien holders in short sales |
| short sales? | | | | Some second lien holders drive a hard bargain of |
| 1) Length of time to close a short sale deal is too long | | | | getting a higher share of the selling price which can |
| Banks typically respond to REO offers within 1 to 2 | | | | destroy the whole deal. And first lien holders are |
| weeks. On the other hand, in a short sale deal, the | | | | usually not willing to compromise to a lesser win-win |
| lender only gets notified of the deal after more than a | | | | deal with the second lien holder, and the buyer is not |
| month of negotiations between seller and buyer. And | | | | willing to pay more to satisfy all the lien holders. |
| banks are much slower to respond to short sale deals | | | | Hence, if you consider the time, effort, and stress you |
| than REO offers. | | | | spend on moving a short sale to a close - REO deals |
| In fact, REO deals typically close within a month, but | | | | are a more profitable way to own foreclosed |
| short sale deals if they close at all can take up to 4-6 | | | | properties. |
| months to close. | | | | |