In my almost 14 years in this business, I’ve never seen a bank owned listing where the seller would NOT insist on selling the home in AS-IS condition, and their addenda are always loaded with AS-IS language to which the buyer must agree.  They declare upfront that the seller will NOT preform any repairs on the property, no matter how major or minor.  They also state unequivocally that the buyer will receive absolutely NO disclosures about the property – even if the seller happens to know things.

And then there are the listings that test the very fabric of sanity: Short Sales.  It’s become common practice for short sale homeowners/sellers to refuse to perform any repairs on the property, irregardless of the severity.  The logic seems to be that if the homeowner/seller is truly in a hardship situation with their lender(s), then how could they possibly afford to make repairs (however reasonable) for the buyer?!  So while navigating through Gilbert foreclosed real estate can be a bit tricky and challenging, it pales in comparison to the insanity of short sales.

For those of you that know me well, it will come as no surprise that I can’t write this post without editorializing a bit.  But first let’s touch on the meaning of AS-IS.  In basic terms, AS-IS means the property is being sold in its existing condition, or as I like say, “What you see or don’t see – is what you get.“  It also means the seller is unable or unwilling to do any repairs on the property, even if we say “Pretty please.“  And to paraphrase the standard Arizona Association of REALTORS® AS-IS Addendum, it also means the seller makes no warranties concerning the condition, zoning or fitness of the property.

For my mini-rant, I’ll say that I know for a fact there have been certain pre-existing property conditions and repairs that were known of and/or done by an asset manager and/or contractor on a bank owned home that could have been and should have been disclosed to the buyer.  That doesn’t seem to matter to them, though, so once again we buyer’s agents are left with waiving the ‘Caveat Emptor‘ a/k/a ‘Buyer Beware‘ caution flag.  How and why banks are allowed to get away with selling foreclosed properties without having to disclose ALL known facts is still beyond me.

As for short sale properties, there’s absolutely no reason the homeowner/seller cannot deliver a Seller’s Property Disclosure Statement (SPDS) to a buyer.  It just makes no sense whatsoever that certain listing agents try to exclude seller disclosures under the guise of AS-IS, and yet I see it all the time.

Word to the wise — it is HIGHLY recommended by the real estate industry as a whole, including yours truly, that every home buyer hires a reputable, licensed home inspector to perform a professional home inspection on the property.  Even though you might have signed an AS-IS Addendum, hopefully your buyer’s agent made sure you didn’t sign off your rights to perform inspections.  Typically, there is a limited time in which to do your inspections (Inspection Period), but what prevails is what’s in writing.  It’s absolutely imperative to do a home inspection as well as a termite inspection. Standard AAR Purchase Contract language gives the buyer an opportunity to cancel the contract and receive a refund of earnest money if anything big, bad or ugly is discovered during the Inspection Period.  Please do NOT construe anything in this post as being legal advice, as each contract and addendum is unique to each seller and buyer.  If you have doubts, consult with your real estate agent and/or attorney.

I’ll wrap up by telling you that just because a home buyer signs an AS-IS Addendum on a bank owned property, it doesn’t necessarily mean they have no other options.  We’ve now negotiated several exceptions to sellers’ AS-IS policies and addenda.

One of my favorite examples is a home that had three (3) covered patios/balconies that on the report of an outstanding home inspector, had little to no life expectancy.  The estimated cost of repair/replacement of the patio covers was somewhere in the $15,000 range – much more than the buyer was prepared to suffer.  In spite of the AS-IS Addendum, we submitted the inspection report to the listing agent, along with a formal request that the seller repair or replace the patio covers.  Guess what  –>  the seller agreed, and 3 days later all 3 patio covers had been professionally rebuilt, and the transaction closed on schedule.  What do you know – a win/win for both parties!

The moral of this story is that in spite of all the attempts by sellers to avoid any responsibility for any property condition(s), AS-IS is not necessarily set in concrete.  If you as a home buyer are ever faced with a seemingly frustrating and bitter situation, be sure to have your buyer’s agent at least ask!  After all, at that point what do you have to lose?

“I saw a house I like.  The price is $100,000 less than the other houses for sale in the same neighborhood.  How can the price be that much cheaper?“

Without even looking up the listing in the Arizona Regional MLS, I would bet $100,000 that I already know the answer. Would you like to venture a guess before I tell you???

Now how exactly does that Jeopardy jingle go?    Da Da, Da Da, Da Da Da… Dot, Da Da Da Da Da. Da.. Da…    Was that close?   

Does the term Short Sale ring a bell? Or what about the difference between a Short Sale and a Foreclosure? Okay… I’ll quit playing around and get down to business.

The listing my client asked about is a Short Sale that has an asking price of at least $100,000 below the nearest comps in the neighborhood. And given the mindset of most folks looking for a deal/steal in this Gilbert Real Estate market, who wouldn’t be attracted by this price?

So what’s the catch??  => On any given Short Sale listing, the asking price is what’s called a “phantom” price. The seller and a buyer can agree to the price, and even sign a contract at that price, but unless and until the seller’s lender(s) agree and approve of that price, the contract will NOT be honored and the purchase will NOT happen. End of story.

How is the asking price of a Short Sale listing determined? It’s determined solely by and between the homeowner and their listing agent.

Doesn’t the asking price have to be reasonable? Or doesn’t it have to at least be based on recent comps (comparable sales)? Nope!

What are the chances of the lender(s) being willing to accept a payoff amount that is substantially below current market value? Slim to none! Lenders have proven over and over again, by their behavior — that they would prefer to foreclose!

So now that I’ve dispelled the nefarious truth about Short Sale asking prices, or at least cast reasonable doubts about their efficacy and integrity, where does that leave the serious home buyer or investor?  =>  With your eyes wide open! The next time you encounter a listing that seems too good to be true, trust your instincts and know that it IS most likely too good to be true. And when in doubt, consult with a Buyer’s Agent you know and trust, and that speaks the truth from her/his heart and experience.

If ever there was a more confusing real estate question than the title of this blog post, I can’t remember it. Here’s my attempt at demystifying the three categories of properties that comprise the residential Gilbert Real Estate resale market in Gilbert, Arizona (and the greater Phoenix area for that matter).

A Short Sale property listing is one in which the homeowner owes more in mortgage loan(s) than the property’s current market value – commonly referred to as being ‘upside down‘ or ‘underwater‘. If the homeowner/seller finds a buyer that is willing to contract to purchase the home, then the homeowner’s lender(s) must be willing to accept LESS than full payoff on their loan(s). Being ‘short’ of payoff is where the term Short Sale originated. [Please note that a Short Sale is anything but short in processing time, as the vast majority of successful or unsuccessful Short Sale transactions take 6-18 months just to find out whether or not the homeowner's lender(s) are willing to play ball and approve the Short Sale.]

A Bank Owned property listing is one in which the former homeowner’s lender has already foreclosed and is now the legal owner of the property. With such listings, an asset manager has been assigned to negotiate the sale of the property, and compared to Short Sales, response times to an offer may be expected by a home buyer or buyer’s agent considerably sooner than with a Short Sale. (NOTE: The terms Foreclosure, Lender Owned and REO all mean the same thing.)

A Traditional Listing is one in which the current homeowner is neither upside down nor in a distressed situation. That can mean it’s owned by a classic homeowner, or it can mean the property is owned by an investor who purchased the property at a Trustee’s Sale (foreclosure), fixed it up and is now re-selling (flipping) it. Either way, the response time to a prospective buyer’s offer is typically quicker than Bank Owned listings.

I can already hear a few of you saying, “SO WHAT?!?! A house is a house, so what difference does it make what ‘type’ of property or listing it is!!” Here’s what  –>  If you’re a nonchalant investor who loves the thrill of gambling and has no worries about time or energy invested, then Short Sales should definitely be your game of choice. But if you’re a serious investor or home buyer who wants a modicum of predictability, respectability, control and sanity involved with your next purchase, then choose wisely – Bank Owned properties and Traditional Listings may very well hold the opportunities you’re seeking.