If you are a first-time home owner looking for property, your first encounter with the world of real estate can be a little confusing as you hear and see many unfamiliar terms. This short guide will give you some information on a few common terms give you a good start and possibly save you thousands of dollars.
A short sale takes place when the owner cannot keep up his monthly mortgage payments for the property. The owner puts the property up for sale and passes the proceeds to the bank. Sometimes the selling price is less than the money owed, in which case the outstanding amount is known as the deficiency. The owner can then try to negotiate loan forgiveness instead of having to go into foreclosure or bankruptcy.
A short sale allows the home buyer to pay the fair market value of the home, even though it may have been valued higher in the past.
A foreclosed home has been put up for sale because the owner cannot afford the mortgage payments. The lender takes the mortgagor to court to repossess the home or order its sale. Buyers have a chance to purchase properties in an auction that starts at $100. However, the lender’s representative is also present and may bid up to the amount of the mortgage in default.
Real Estate Owned is property owned by a lender after it failed to sell at a foreclosure auction. For instance, if the property was forcibly put up for sale with outstanding mortgage of $100,000 then the starting bid would have to reach that amount for the sale to take place. If there are no buyers, then the lender takes possession of the property. This often happens if the amount owed to the lender is more than the current market value of the property.
These homes, sometimes called bank owned properties or foreclosures, are often sold at a discount, even below fair market value. The lender becomes responsible for the taxes and maintenance of the property when they take possession.
FSBO stands for: For Sale By Owner. This means that the owner is going through the sale process without an agent, who will usually collect 6% commission on the sale. The seller may be approached by a buyer with or without an agent. If the buyer does use a Realtor, the seller may refuse the offer and is not forced to pay the agent any commission.
Lease with Option to Purchase
Often used as a method of owner financing, a lease with option to purchase is a set of contracts where a person leases a property and purchases the option of buying later. The lease option agreement is usually for 1 to 3 years. The tenant usually pays the owner a sum of money, which is non-refundable, for the right to purchase the property later, perhaps because he is expecting his finances to improve.
With all the above options of buying or selling your home, always seek professional advice before taking any definitive steps and make sure you fully understand the implications of each decision.