Purchasing a distressed property offers a hefty discount compared to many other properties for sale. In 2009 half of all homes sold in California were foreclosed homes or short sales. This presents a great opportunity for buyers that have cash on hand for a down payment.

Short sales were created to relieve homeowners who have negative equity from their loan. Negative equity is when an asset, particularly real estate, is valued less than the mortgage taken out against it. When a homeowner's mortgage is "underwater", they have the ability to list their home for sale at a reasonable market value. If they find a buyer, secure the relevant contracts, and submit these documents to the bank they can PLEAD! to be released from the loan. There are no guarantees, minimum three months wait, and possible tax obligations that send many running.

In a short sale transaction the BANK that owns the mortgage makes the decisions about what the home should sell for. It is completely up to that bank to approve, disapprove, or counter any offer that is submitted. For this reason purchasing a short sale is a long and frustrating process. Success can be achieved by buyers with flexible timelines and careful planning. Consult an REO or Short Sale Specialist for actionable advice.

REO, Real Estate Owned, Foreclosure - the infamous listing type that attracts herds of buyers and Realtor's with absolutely no idea how to submit an attractive offer to the bank. An REO is a listing type that occurs after a property has been foreclosed on. After foreclosure the property may be purchased back by the bank to sell on the open market. Purchasing an REO property is difficult so make sure that you STRICTLY abide by the guidelines set forth on the MLS and supplemental addendums.

When structuring your offer ask the agent if you are requesting repairs, more than 2% closing cost credit, requesting specific title/escrow companies, or asking for more than 30 days to close escrow? If you are asking for any of the previous items your offer is weak. It will most likely be brushed aside for a clean offer that obligates the seller to do as little as possible to close escrow. Despite the fact that it may be YOUR RIGHT to request a specific title/escrow company, when dealing with a bank I recommend that you exercise your rights as a buyer effectively. At the end of the day the highest and best offer always wins. Pay close attention to the term "best". An offer well above asking price might clinch the deal...but if you ask for the wrong terms it will MOST CERTAINLY kill your deal.

The hard truth is that if you are working with someone that does not intricately understand the REO/Short Sale market you are at an extreme DISADVANTAGE. When you have submitted multiple offers with no success...Please, contact an REO or Short Sale Specialist.