Ive had a lot of clients interested in returning to our market to pick up a steal or two. Invariably, they start their home search on the internet by clicking "Search Las Vegas Homes for Sale" and they find these fantastically priced homes.  When they call me and ask me about the listing, 4 out of 5 times its a bank owned property or a short sale.  I wanted to write a post about the difference between the two.  First lets talk a little statistics to get you up to speed with our current market:

As of February 15, 2009 there are:

• 15,652 Single Family Homes on the market.
• 5,429 of those properties are Short Sales
• 5,563 of those properties are Bank Owned
• 4,544 of those are traditional sellers
• 169 Short Sales are under contract in contingent or pending status
• 3,544 Foreclosures are under contract in contingent or pending status
• 629 traditional sellers are in contingent and pending status.

I originally wrote this post on November 24,2008.  While I was updating this post, I was a little surprised to see some of the numbers.  Take a particular look at the drop in inventory of homes(a great sign the market is improving).  Also take a look at the HUGE increase in foreclosures going into contract. A lot of buyers and investors are picking up these very well priced homes. Let's take a look at the statistics from November:

• 17,035 Single Family Homes on the market.
• 5,676 of those properties are Short Sales
• 5,770 of those properties are Bank Owned
• 5,589 of those are traditional sellers
• 1,818 Short Sales are under contract in contingent or pending status
• 701 Foreclosures are under contract in contingent or pending status
• 523 traditional sellers are in contingent and pending status.

So having brought you up to speed on the market, let me tell you from first hand experience the difference between Short Sales and Foreclosures.  The biggest difference between the two is a short sale is still owned by the seller and they are trying to sell the property at a loss. The bank who holds the note has to approve of the terms of sale.  This process on average in Las Vegas takes about 200 days.  Only 15 % of the short sales that go to contract  are actually closing and the long escrow is one of those reasons.  I personally have a client who submitted an offer on a short sale on July 10th, and we had not received a response as of January 1, 2009. That is almost 6 months!!  Buyers run a couple of risks on short sales:

• The bank foreclosing on the property even while youre in escrow.
• Tying up earnest money for months at a time.
• The bank countering at a higher sales price than agreed upon by the seller.

Now, having said some of the down sides, if you are patient there can be some substantial deals with these short sales and there are short sales that have APPROVED sales prices.  What does that mean?  It means the agent has already started the short sale process with the bank, an asset manager is assigned to the property, and they have a green light to proceed at that specific list price.   If a buyer comes in with a lower amount, they would have to go through the same process...just a little bit faster.    Another experience I had with a client:  We put in an offer on a short sale listed at $600,000.  We offered $500,000 and the bank rejected it.   Three weeks later it was foreclosed on, and put back on the market at $430,000.  Yes folks, that is the kind of logic that were dealing with in this market.    Banks are ill equipped to handle the extraordinary amount of short sales landing on their desks and consumers....actually we ALL are paying the price.

Foreclosures or REO (Real Estate Owned) are properties that a bank has taken back from a seller for non-payment.  Banks do not want to have these assets and try to sell them within 30 days of being put on the market.  Banks have never stepped foot into these homes, and have no idea what has happened inside the property;therefore they are sold "AS-IS" with no repairs and no disclosures.   They work just like a normal sale but there are a couple of things to be aware of if youre purchasing a foreclosure:

• Although faster than short sales, they take time too. 45-60 days for a "normal" escrow.
• Response times for offers can be slow. (I had a client wait 3 weeks for a response and then they reject it)
• Banks send out addendums to clients after an agreed upon price, close of escrow, closing cost, home warranty etc.  READ THESE ADDENDUMS TWICE!!  These addendums basically rewrite the contract to protect the bank.  There can be steep penalties for specific performance.
• Many of the properties are not in move in condition and are usually priced to reflect that. The foreclosures that are in good condition and are priced well are receiving multiple offers. 

84% of all closings in Las Vegas are Foreclosures.  In fact, I have only sold 2 "normal" property in 2008. EVERYTHING else has been a foreclosure.  These properties are usually priced in the bottom third of the market.  Buying a foreclosure is very similar to a regular sale. You still have your inspection period, you still get to approve of the Home Owners Association documents, you still have appraisal contingencies BUT READ YOUR ADDENDUMS!!  All of these terms are spelled out in the addendums and can favor the bank.

Felipe Crook

Prudential Americana Group Realtors

Las Vegas, NV 89117

1-866-589-1646