Real Estate Purchase Transaction Types
Owner Occupied-
An owner occupied property is a property that is occupied by a person that is on the current property Title. Remember, when we negotiate on an owner occupied property we are negotiating with the owners themselves.
Keep in mind:
These Sellers may have a strong emotional bond with their property
Owner Occupied Homes can sometimes be over-priced because of the owners bond to their home and their knowledge of the money they have invested in the home over time
We may not be able to get the lowest price – but patience and the flexibility to negotiate should pay off in a fair price, it all depends on how motivated the Seller is.
Potential benefits to the Buyer:
Purchasing a home that may have expensive upgrades and improvements
Financing may be easier to obtain
More dependable transaction closing timeframe
Price generally remains stable after contract is mutually accepted
New Construction-
A property built to suit a clients specific needs or a home that has been built but has never been occupied. Typically you are dealing with a builder who is very concerned about the bottom line and has streamlined the sale/purchase process by customizing the sales contract and specifying the terms of your home purchase! Newly constructed homes typically come with a great, builder provided, home warranty. We prefer to be present when you go through Builder Models to help you understand what truly is being offered and to represent your best interests when negotiating with the builder site agents for your new home.
Keep in Mind:
The builder may not complete the new home in the promised time frame
Problems and changes can be common occurrences as the home is being completed
You may NOT be able to get the lowest price on pre-sale homes but if you purchase a completed home the builder will be more pre-disposed to negotiating a more favorable deal for you – you will always win with flexibility
Having YOUR real estate agent present to guide your home purchase negotiations will always protect your best interests…don’t ever forget that the Builders Site Agent is there to represent the builder’s best interests
Occasionally a new construction purchase may require a Construction Loan which can have additional approval requirements
Potential benefits to the Buyer:
The Builder may have a preferred lender that will make it easier to get financing
Many times you can select your personal preference for finishes in the home and you can also choose to upgrade certain items in your new home…of course at an increase in cost
Price doesn’t generally change after contract is accepted, unless buyer adds features
Investment Properties -
Are usually bought as a non-owner occupied property by a buyer who wants to invest in real estate to gain rental income and/or appreciation on the value of the property.
Keep in mind:
As an investment buyer, you generally will look at what return can be made on the investment.
➢ We can help you find the investment property that will meet your goals and give you sound advice on what it may take to get a rental property ready for a tenant, especially if it is a "fixer upper".
Lending requirements are stricter on non-occupant investment properties so it is very important to be pre-approved with a lender or have “proof of funds” for a cash purchase, before looking for an investment property.
Distressed Property Types
Short Sales -
A short sale is the sale of a property in which proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner can no longer make their mortgage payments.
Potential Benefit to the Buyer:
You might get a “great deal” where you purchase the property well under market value.
Keep in Mind:
“How it works!” First the property owner will accept your offer but then the offer must be approved by ALL of the lien holders on the property (i.e. mortgage bank, investors, 2nd mortgage, IRS, etc) this WILL take a long time!
The 3rd party, lien holders, can impose conditions on the sale beyond what is negotiated between Buyer and Seller on the original contract.
It WILL take up to 1-3 months to receive a response on an offer from the lien holders and it could take longer. After waiting all that time there is never a guarantee that the lien holders will approve the price, even if you offer more than the asking price.
The 3rd party lien holder can require that other offers are still received while yours is in the process of being approved.
Another, better offer can be accepted by the lien holder at any point in time, even though your offer has been accepted by the Seller.
Financing obstacles – potential interest rate changes during 3rd party approval waiting period
You might be required to get a 2nd pre-approval by the 3rd Party lender as a condition of sale.
The price can still change, even after the Seller accepts your offer
Foreclosures or REOs -
Bank and Government Owned Properties – HUD, VA, FannieMae, FreddieMac, Auction. Real Estate Owned. It comes back into the bank/government portfolio via a foreclosure process. Most REO properties are sold AS-IS with the seller making no repairs. It is also addressed in their corporate addendum's stating that the buyer will purchase AS-IS, but still have the right to contingencies of inspections.
Keep in mind:
Response time from the bank can take at least a few days
AS-IS condition; many times these properties are trashed and anything of value that is removable will be taken out by previous owner – how handy are you?
The price to purchase the property is only the beginning of the total cost to make it livable.
They will often have a multiple offer situation, yes..a bidding war!
Undefined surprises can often take place after closing the deal.
The property may have possible Title problems that will prevent Title insurance from being issued and as a result the property will NOT be financeable – are you prepared to be a cash buyer?
