DFW Real Estate – Buying Foreclosures, Short Sales and REO’s

Dallas foreclosures, short sales and REOs are all dangerous animals but they are different from each other. However, they are also similar because without knowledge about how each of them work you could find yourself in dangerous territory and in trouble. As an example, while most short sales are foreclosures, not all foreclosures are short sales. To further complicate things, REOs are not short sales either, but some intended DFW Real Estate short sales can end up as an REO property. Retain the services of a professional Dallas Realtors with experience in these areas to advise you.

What is a Foreclosure Home?

A foreclosure home is when a notice of default has been filed in the public records by the mortgage company. It means the owner has stopped making their mortgage payments and the lender has given notice that unless the payments are brought up to date, it will sell the home at auction to the highest bidder. Lenders can foreclose for other reasons, but the most common reason lenders file a notice of default is when a borrower is two or more payments in arrears. If the home owner does not bring the mortgage current, the lender will file to take the property away from them.

Not all homes that fall into foreclosure go to public auction because owners have the right to make up back payments up to a certain point; this time varies from state to state. Real estate investors and home buyers see profit in buying foreclosed homes because they can often buy the property for the amount owed on the mortgage, picking up the home owner's equity for free. Even high end areas like Highland Park homes are not exempt from foreclosures, short sales and REO’s.

What is a Dallas Short Sale Property?

A short sale generally occurs when a home owner is in foreclosure but before the property goes to public auction. With a short sale, a lender must agree to accept less than the amount that is owed on the mortgage balance. Unlike with a foreclosure, investors generally buy the home for even less because investors are not paying off the existing mortgage and they aren’t making up the back payments. Investors attempting to make a deal with the existing mortgage company to take less than what the lender was originally due in order to avoid dealing with the time and expense of a foreclosure.

It's a myth that mortgage companies are not going to accept an offer from an investor unless the seller has fallen behind on their obligation to make timely mortgage payments. Sellers don't need to be in default for a short sale to occur. For a buyer who wants to live in the home, buying a short sale makes financial sense but the short sale time line may pose a challenge for some.

What are REO Propertied - Real Estate Owned?

• Buying an REO is similar to buying a short sale except the property is already owned by the mortgage company.

• The property was acquired by the lender through a foreclosure action where no one bid higher than the amount owed on the mortgage.

• Many time lenders will sell repossessed homes for less than the past mortgage balance to get them off their books.

• Bank-owned properties are called REOs, meaning “real estate owned” by the lender.

Mortgage companies end up owning the property when no one at the foreclosure auction bid high enough to cover the amount owed against the property. REO homes are often considered one of the best ways to buy a distressed property. This is because the seller is already out of the home and of the picture. It's just the investor or person wanting to live in the home, the real estate agent, the bank and the bank's asset manager who are negotiating the transaction.

Bottom of the Dallas Real Estate Market?

Many Dallas homeowners believe their home's value has declined over the past year. A majority of these homeowners also believe a bottom has been reached in the Dallas Real Estate Market. According to a Zillow Home Confidence Survey, a majority or homeowners across the country, or 60 percent, believe their home lost value during the past 12 months. When in reality, 80 percent of homes across the country lost value during the past 12 months according to the same market reports. Furthermore, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey.

The perception of homeowners is finally catching up to reality, which is that 80 percent of all homes in the country lost value during this past year. While homeowners are now more realistic they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes prices will increase or be flat over the next six months. Most homeowners believe their home will not decline in value in the coming six months, effectively calling a bottom to their own home's housing downturn.

The survey showed specifically, one in four homeowners think their home's value will increase in the next six months, while nearly half of them believe its value will remain the same. Homeowners were also optimistic when it comes to predicting home values in their local markets. About two-thirds of homeowners believe home values in their local markets will increase or stay the same over the next six months. Thirty-seven percent believe home values will decrease. It also showed a significant number of potential sellers are holding off because of current market conditions. When asked about future plans to sell, 31 percent of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround.

What does all this mean to the Dallas Real Estate Market? The Dallas Real Estate Market like any other market is local and the national numbers do not reflect the DFW Home Market. The DFW Home Market has remained resilient due to job growth and the xxx of people want to move to the area. To get a true perspective of the market conditions in your area you may want to consult a Dallas Realtor. A Dallas Realtor has access to the Dallas MLS and can give you accurate date