So here’s the skinny on foreclosures and short sales since so many buyers want to pursue these transactions in hopes of snagging a great house at a below market price. Buying a short sale or a foreclosure can definitely be a great way to get a bargain on a property, however, sometimes all that glitters isn’t gold and challenges can arise from these types of sales. Below you can find some details to determine if a foreclosure or short sale is right for you!
The main difference between a short sale and a foreclosure is the ownership. In a short sale the borrower still owns the home, whereas in a foreclosure a third party owns the home. Basically, if your mortgage payments go unpaid for a period of time the lender can come-a-calling to collect their interest in the property. Typically, foreclosures are owned by banks and are sold at auction or with a real estate salesperson.
In a short sale sellers work with their lender to accept a price that’s less than the amount owed on the property; as part of this arrangement, the lender generally agrees to forgive the rest of the loan. Contradictory to its name buying a short sale often is anything but short, considering the fact not just the buyer and seller have to come to an agreement but also the lender, as well as anyone else who has a lien on the property.
Consider these tips before deciding on pursuing a short sale or foreclosure:
Do Your Homework: Read all the information you can on foreclosures and short sales, contact (Mortgage, Real Estate, and Banking) professionals. Attend seminars, watch youtube videos, and read any testimonials you can find from buyers and sellers of foreclosure and short sale properties in your area.
Hire A Real Estate Agent: You are going to need help with any real estate transaction you plan on making, from offers to closing you want an agent who owes sole fiduciary responsibility to you in your corner. If you are interested in foreclosures or short sales, find an agent who specializes in these types of transactions.
Be Realistic: Be sure to have a flexible and realistic timeline when it comes to foreclosures and short sales. As I mentioned before, short sales are anything but short, so flexibility will save you a lot of stress down the road.
Be Aware of Hidden Costs: If you buy a foreclosure at auction, you’ll likely never enter the property before becoming the legal owner. You will also get the property “as is.” That means no inspections and the title you get may be clouded with liens. You may even find yourself in the position of needing to clean out the previous owners things or even having to evict the previous owners. If you don’t factor in these extra costs you could find yourself in a pickle financially and your “bargain” purchase may become anything but.
If you’re a first time home buyer or a flipper looking for a quick ROI be sure to enlist the help of a seasoned real estate agent, especially someone who has experience with short sales and foreclosures.