One of the reasons that the state of the market can be unclear when you look around online is because listings don’t always include everything in the clearest terms. One of the newer and more subtle ways this happens is that a listing will say something to the effect of “subject to third party approval” in the comments section way down near the bottom. I’ll explain what that means below. Here are some of the more common terms of sale you’ll see or hear about in real estate listings.

Transfer Types

Fee Simple

This is the most common type of sale, and it means that the building, as well as the parcel of land it is located on, are what is being conveyed. This implies that there is at least some land being sold only to the purchaser and that is not to be shared by anyone but the owner of that parcel. Fee simple, or ‘fee simple absolute’ as it’s sometimes called, is the way single family homes and townhomes are normally sold.

Condominium Ownership

What makes a condo different from a townhouse or single family house is that when you buy it, you’re getting exclusive ownership of your ‘unit’ with shared ownership of the common grounds that the units are located on. Essentially this means that you don’t get any land when you buy a condo, but instead the land is owned by you, the other residents, and the neighborhood association, collectively.

Sales Terminology

Auction

Sometimes a foreclosed home is sold at auction to speed the process and get it off of the lender’s hands. Banks and mortgage companies don’t specialize in marketing and selling houses, so when a foreclosure happens they find themselves in possession of something they want little to do with besides collecting interest dollars. Bidding in an auction often starts in the amount owed to the bank by the former owner of the property, or an amount close enough to it that they can recoup most of their losses. An auction seldom yields large amounts of profit from a foreclosure, but most of the time it at least keeps the lender from taking a huge loss.

Quick Sale

This is a type of auction that is initiated by the homeowner, often because she wants to avoid foreclosure or no longer wants to keep the property for some other reason.

Short Sale

In the introductory paragraph above, I mentioned some listings including a phrase like “subject to third party approval.” If you see this on a real estate listing, it most likely means that the current owner wants to avoid foreclosure by selling the property quickly. However, this is called a “short sale” because the price at which the property is being sold is less than what the owner owes her lender.

The “third party” in this case is the bank or lending institution, and the short sale happens something like this. First, the homeowner puts the property on the market and tries to elicit offers from willing and able buyers. Once they have an offer or multiple offers, they then have to ask their lender for permission to sell this property for less than they owe. Sometimes multiple offers come in and potential buyers are left waiting for weeks or months while the homeowner juggles offers and attempts to convince their lender to take a hit on their initial investment. These situations can result in multiple ratified contracts as the seller has the ability to “accept” offers from more than one buyer. It can be a frustrating and potentially dangerous situation, so I personally recommend against considering the purchase of short sale properties unless you are an investor who has the time and resources to deal with any of the myriad situations that could arise.

Foreclosure/Bank Owned

A bank-owned house is exactly what it would seem – property owned by a bank or lending institution. The foreclosure market is popular because people think it’s easy to find a cheap house and fix it up to be sold for profit. This process is called flipping, and while it has worked for a lot of people, the average first-time home buyer should be wary about being lured into this line of thinking. If you can’t afford two mortgage or rent payments, the first home you buy should be in livable, move-in condition when you buy it. A bank-owned foreclosure property is usually the bank’s last concern; it’s not like a house owned by a family or an individual where the condition of the house is a personal matter. This means that if you get to the inspection phase on a foreclosed home and the inspector finds whatever he finds wrong with it, the bank is probably not going to do anything about it, whereas the “human” homeowner may at least be willing to alter or renegotiate the terms of your sales contract to account for any problems with the house.

As-Is

Foreclosures are normally sold as-is, meaning that the seller is unwilling or unable to make improvements to the property based on the findings of a home inspection.