The banking research firm Credit Suisse & Clayton estimates that almost 9 million properties are distressed in the United States , with 800,000 of these being REO’s—bank owned properties. Most buyers think, and quite rightly so, that a bank-owned property is easier to buy because the time period from offer to contract to sale is relatively short. What they may not know is that an offer on an REO is more than likely to be considered in competition with other offers, while short sales, by their very nature, require that the lending institution work to approve only one offer at a time. Buyers may face 90 days or more before a response on a short sale offer, but at least theirs will be alone.

Sellers too have many reasons why they are well advised to conclude a short sale rather than end up in foreclosure. The most important of these reasons relates to credit: a homeowner or investor who successfully closes a short sale will be eligible for a Fannie Mae backed mortgage in only two years rather than a minimum of five for foreclosed homeowners. Additionally, credit scores and history are minimally affected following successful short sales, as opposed to foreclosures which affect scores by 250 points or more and remain on histories for at least 10 years.

What about price, you may wonder? In both scenarios, pricing is highly competitive and both usually bring great value to the buyer, with time, not type, being the determining factor in downward pricing. My advice is look at all types of property and buy based on your notion of personal value, but don’t disregard short sales. After all, 8.1 million houses are nothing to smirk at!

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