Portland Maine Realtors | Portland Maine Realtors

Portland Maine Realtors:

Every now and then we meet a buyer or a seller that asks us about the difference between a private sale, foreclosure, HUD home, and short sale. In this article we will review the differences.

Private Sale

These are homes that are being sold by their current owners. The owners may or may not have a mortgage. And if they do have a mortgage, they owe less than the house is worth. This allows them to sell the house to whoever they want without having to ask the bank for approval first. Once they sell the house, they pay the bank the balance of the mortgage and pocket the difference (minus closing costs).

Foreclosures

These are also known as bank owned or REO (Real Estate Owned). These are homes that the bank foreclosed on. The owners stopped making payments and after a few months the bank took the house back. Once the bank takes the house, they hire a local REALTOR to sell it. Because banks in general do not want to own homes they are usually very motivated to sell and will usually discount the property to sell it fast. This is the reason why you can get very good deals on foreclosed homes.

HUD Homes

These are homes that are owned by the US Department of Housing and Urban Development (HUD). These are typically homes that were foreclosed by a regular bank. When the original mortgage was an FHA mortgage the bank has the option to make an insurance claim against HUD. As you may or may not know FHA mortgages are loans insured by HUD. So instead of becoming a bank owned property, it becomes a HUD Home. HUD also does not want to own houses and sell its inventory through an online auction. To buy a HUD Home you will need to work with a REALTOR that is registered with HUD. And because HUD is very motivated to sell homes you can usually find very good deals on HUD Homes.

Short Sales

Short sales are homes where the owner owes more than the house is worth and he doesn’t want to pay the bank the difference between the sale price and what is owed. In a typical short sale, the owner is behind in payments and if he doesn’t sell the house through the short sale it will eventually be foreclosed by the bank and become a bank owned home. In a typical short sale, the bank has to approve the transaction before it can be completed. With patience you can usually also find good deals in short sales.

I hope this article helps clarify the most common types of real estate transactions. Each type requires a different set of skills and brings its own rewards and challenges.

via portlandmainerealtors.com