Different Types of Home Sales to Know
Before learning about what kinds of steps you can take, it’s hugely important to simply to get know some basic terminology and different classes of home sales. It’s a crucial first step to learn how to buy a home properly – after all, you can’t expect yourself to make a sound, informed decision if you don’t even know what you’re dealing with.
If you need help with more terminology, a useful resource to visit is the HUD Glossary.
- Foreclosures (REO): Everybody knows about foreclosures, but an REO is a specific type of foreclosure to become familiar with. REO stands for real estate owned, and it’s when a lender, typically a bank, officially owns a property and has it listed as an asset on its own books. In most cases, this means that it didn’t sell at an auction or through a short sale, and now the bank is left with the property, and will try to sell it directly on its own, or through a realtor.
- Pre-Foreclosures: Pre-foreclosures take place when the original borrower works out a deal with his or her lender to sell the property for less than what is owed in order to avoid foreclosure. The successful sale of the property erases the borrower’s debt obligations to the lender.
- Short Sales: Short sales are also sales in which the home sells for less than what is owed, and it’s a procedure designed to sell the home quickly at a reasonable price, instead of waiting out a longer sale process. With short sales, the mortgagor’s debt is not completely settled, and he or she will still owe a portion of their original obligation in many cases.
- Auctions: Auctions are what most individuals associate with foreclosures. At a foreclosures auction, the house is put at auction by the lender. Whomever places the winning bid becomes the new property owner, but in most cases cannot bid on credit, and needs to provide cash or cash equivalent at the time of the sale.
- Tax Sales: There are two types of tax sales, but when you’re interested in learning how to buy a home, you’re really only looking at the second kind, called tax deed sales. In these cases, a county government sells full ownership of a property due to large obligations of unpaid taxes.
- FSBO’s: If you don’t know the acronym, then an FSBO is very simple to learn, as you can see with [linkto: http://forsalebyowner.com]Forsalebyowner.com[/link]. It’s a home which is being sold directly by the owner, without the use of realtors and other agents. The benefit is that it saves the commission fee, which if it’s clocking in at 5% of a home’s value or sale price, can quickly run into tens of thousands of dollars. For example, a 5% realtor commission on a $250,000 sale is an extra $12,500 that you have to pay.
- Rent-to-Own (Lease Option): Rent to own properties are a great way to move closer towards owning a home outright, without needing to put yourself in as much risk upfront. You lease a property similarly to how you might rent an apartment, but you have the option to buy the property before the lease agreement runs out at a predetermined price.
- Standard Resale (MLS): MLS is short for multiple listing service, and it’s a basic system used by realtors and realtor groups to list homes and sell properties. This is the most standard process that everyone is familiar with dealing with.
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