The Warf off Glade Drive in Reston, VA. All homes are waterfront.
and yes...there are short sales and foreclosures here periodically
What is a short sale?
Jim: What does it mean when I see the words “short sale” or “3rd party approval required” in the remarks section of the listings you've sent me for Herndon and Reston?
Steve Bachman: Jim this is a long post about short sales. A short sale is the attempt by the home owner to sell the home for less than he owes on his mortgage. Unfortunately, short sales have become a common occurrence in the last 3 years as prices have fallen from their peak in 2005/2006.
For example: in many areas a home that sold for $500k in 2005 will now bring only $425k at current market prices…if the seller had 100% financing or close to it…he will not be able to pay the full amount he owes the mortgage company should he sell at $425k. If the seller netted $390k after his sales expenses he would be “short” $110k on what he owes on the home if his mortgage is $500k; hence the name “short sale”. 3rd party approval required is wording which also signals a short sale. It means that in order for the sale to take place, a 3rd party (the lender) must approve the terms of the loan….the seller has no authority to sell his home for less than he owes since he does not hold clear title to his home until any mortgages or liens on the property are paid off.
Unless the sale has been approved by the bank at the price advertised in the listing, the odds of that home selling at that price are close to zero.
An attempt to avoid foreclosure
In a short sale situation, the listing agent for the seller is attempting to get the bank to let the him off the hook (not foreclose) by accepting an amount that is short of full repayment of the amount he borrowed. If you as a buyer put in an offer to purchase a short sale, there is no guarantee that you will even get a response from the bank since in many cases they are not aware of the seller’s attempt to do this, unless the listing agent really knows what they are doing.
In many cases, the listing agent takes the listing in order to collect some offers to forward to the bank in the hopes that the bank will agree to accept one of them. If a buyer is in no hurry…making an offer on a short sale is OK. We recommend that clients who need a home in a particular time frame avoid them.
We recently had an offer in on a short sale for more than 90 days with no response from the bank. All of this because the bank had never authorized the sale in the first place. Our client understood the situation, but wanted to make an offer anyway to see what might happen. Nothing happened. If one of our clients is interested in pursuing a particular short sale, my first question to the listing agent is Have you submitted a complete short sale package including the hardship letter? Then, “has the bank approved this price?” Thirdly “how many payments behind are the owners?” If the agent doesn’t know the answers or if the seller is only a couple of payments behind, there is almost no chance that a short sale will ever work out to the benefit of one of our clients in any reasonable time frame.
Unless the sellers can bring their mortgages current or sell at a price acceptable to the bank, they will go to foreclosure sale on the court house steps. Since most of these homes have no equity in them, the only bidder will be the bank holding the mortgage. Their bid will be the amount that is owed on the home. These homes then fall into the category of “bank owned” properties also known as REO properties, which stands for Real Estate Owned in industry language.
Bank Owned or Foreclosed Homes
Attempting to buy a Bank owned property (called an REO) is much more straight forward…the foreclosure has already taken place, the original owner is out of the picture and the bank lists the home with a Realtor at a price that they WILL accept.
A huge number of the homes currently for sale in Prince William and Loudoun counties right now are distress sales of one kind or another. They can also be found in smaller numbers in Reston, Herndon, Fairfax and the inner suburbs.
In conclusion, unless a particular home is our client’s dream of a life time and they are in no particular hurry, we encourage them to pursue bank-owned homes or normal human-owned homes. Unless the LISTING AGENT for the seller who is in trouble is well trained, the likelihood is that there is only an 18% chance(nationwide average) of that home going to a successful settlement. What usually happens is that the property will go to foreclosure and re-emerge in 90-120 days as a bank owned (Reo) foreclosed home.
Why pay more and get less when selling your home? Jan and Steve Bachman of RE/MAX Gateway use professional photographers, create interactive photo floor plans, print full color brochures, and make an individual property website for your listing that goes out to 40+ public real estate search sites including Realtor.com, Trulia, Zillow etc.
We also create a custom photo tour that is sent to other agents and prospective buyers.
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Jan and Steve Bachman are full time Realtors® with RE/MAX, specializing in Homes for Sale in Fairfax, Loudoun, Prince William and Arlington Counties.
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