Josh Sanders, Founder of Shiloh Street
It’s a no-brainer…. foreclosed homes are the best bargains in real estate today. I don’t have a day go by that a homebuyer doesn’t ask me about foreclosed homes.
But do you know why you should buy a bank owned home vs. a short sale?
Sadly, most home buyers don’t know that they should run from short sales like the plague and seek out bank owned homes like they were made of gold. 
Here are my top 4 reasons to buy a bank owned home vs. a short sale:
1) Buying a Bank Owned Home Takes ½ the Time vs. a Short Sale
What shocks most home buyers is the reality that buying a short sale home can take 6-12 months! And even then, the transaction could fall apart in month 11 and you get to start the home buying process all over again at square one.
You can read my previous post on ‘What is a Short Sale in Real Estate’ but the short story is that 99% of the time the bank has no idea that the homeowner is trying to do a short sale. They don’t find out until an unsuspecting home buyer makes an offer.
When the bank gets the offer faxed to them, they’re blindsided. They had no idea the seller was trying to sell and they understandably don’t want to lose money on the deal so they drag out the short sale process for months and months.
What does that mean for the home buyer making an offer? You got it; more wasted time, stress and frustration than you could ever imagine!
On the flip side with a bank owned home, the bank has already foreclosed on the property and they own the home outright. The banks own a pant-load of real estate today that’s just sitting vacant and costing them millions or even billions of dollars.
So when you make an offer on a bank owned home, they typically move much quicker to get that real estate (REO property) sold and off their books. They’re not being surprised as with a homeowner trying to get a pesky short sale approval so the transaction is much smoother and faster.
2) The Listing Price of a Short Sale Has NOT Been Approved!
Home buyers are so attracted to short sales because the listing prices they see are SO low, right? Who wouldn’t jump on a piece of real estate when it’s 50% off?
The problem is that the listing price you see has only been set by the seller and their real estate agent; NOT the bank! So when you make an offer to purchase, the seller doesn’t have the authority to approve it. Surprising, huh?
It’s the bank that has to make the final approval because they’re the party taking the financial loss; NOT the sellers. The seller is just setting a low price in hopes of getting multiple offers to submit to the bank.
Once the bank reviews these offers, they don’t want to accept one right away. They want to drag their feet and wait to see if another buyer will make a higher priced offer.
Can you see why these nasty little short sale homes can take 6-12 months to buy?
In maybe 2% of all short sale homes listed for sale (my own educated guess), the sellers and/or Realtor will have gone to the bank first to get the listing price approved, which helps to speed up the process. But again, it’s probably only 2% of the time so don’t get your hopes up too much.
3) Bank Owned Homes are MORE Motivated to Sell
Due to the fact that banks have such a glut of foreclosed homes from the current real estate market, they need to sell and clear them off their books quickly. They understand that they’re taking a financial loss but they’re losing more money the longer they hold onto this real estate.
Again, when a bank owns the home, they’ve already been through the foreclosure process and hired a real estate agent to list the home for sale at an APPROVED sales price. They just want to see offers and get that property sold…. yesterday!
This means you spend less time, stress and frustration negotiating and buying a bank owned home. The bank is ready to sell; they just need a buyer.
But with a short sale, the bank is in no hurry at all. They generally have no idea the homeowner is trying to do a short sale and they definitely aren’t in a rush to lose money. Would you be? The banks have no motivation to get rid of the home at this point. They’d rather wait and see if they can get a higher price from another buyer or at the foreclosure auction when they go through the foreclosure process.
4) You May Get a LOWER PRICE on a Bank Owned Home
You may have already figured out this little nugget of knowledge yourself but you could get a lower purchase price if you buy a bank owned home vs. a short sale.
Because bank owned homes take ½ as much time as short sales, their listing prices have been fully-approved and the banks who own them are so motivated to sell, you could wind up stealing the home at a lower price than any other comparable short sale home.
Of course there’s no guarantee but all those benefits of buying a bank owned home add up to the possibility of you finding a killer real estate deal. Compare that with all the negatives of trying to buy a short sale and you can clearly see why I’m telling you to run from them like the plague, right?
Before you go, let me be clear about one thing so you have some realistic expectations….
While bank owned homes may be the way to go when buying a house, you’ll still hit a few road bumps along the way. But that’s why you need to make sure you’ve picked a top-notch real estate agent so they can hassle with all of that for you.
Compared to buying a short sale, bank owned homes will still save you loads of time, stress and frustration. Plus, you might just end up buying the home of your dreams at 50% off (no promises though).
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[...] sure to read our post on 4 Reasons to Buy a Bank Owned Home vs. a Short Sale, no matter which type of real estate you end up buying. That’ll help you get a killer deal [...]