Short sale and foreclosed homes offer buyers the ability to purchase a home at a lower price. However, navigating through the purchase these types of properties can be intimidating and unnerving. Becoming familiar with the process of buying these types of homes and knowing how to decide whether a property you are interested in is a good investment can help alleviate some of the stress and simplify the process.
A short sale means that an owner is attempting to sell their property due to the inability to close the transactions [is there a diff. way to phrase this? I don't know what these transactions are...], according to realtor.com. An owner may owe more money on a home than the market value of the property. In this case, the owner needs short sale approval from the lenders and typically they will agree to allow the owner to sell the home for as much as the remaining amount owed on the mortgage.
The confusion between short sale and foreclosed properties may stem from the fact that many short sales occur during the pre-foreclosure process. However, a short sale is unique from a foreclosed home because it is not yet repossessed by the lender.
According to Bankrate, purchasing a short sale home can help a buyer acquire a home for less money and help keep a sellers credit record free of a full foreclosure blemish. However, the seller's credit will still feel a blow from having to conduct a short sale. These transactions are typically complicated and difficult to navigate. If you decide to pursue this option, ensure you have plenty of resources to depend on and a clearer understanding of short sale properties and this buying process.
It is also crucial to know exactly what a short sale transaction entails. Typically these sales take quite a bit of time to close. There are a number of agreements and contracts that must be negotiated among many different parties affected by the sale of the asset.
When a homeowner is unable to keep up with payments and the bank repossesses the house, the property has become foreclosed. A foreclosed home may be sold in an auction to the highest bidder and if it is not, it will be listed on a multiple listing service.
A real estate agent has access to the list of available foreclosed homes and can help you find potential listings you might be interested in.
Preparing to purchase a short sale or foreclosed property
If you decide you want to purchase one of these types of homes, make sure you recruit the help of a professional. Hiring a real estate agent, a qualified home inspection company and an attorney with adequate experience can help you wind up with a better deal and understanding of the property you have decided to invest in. Bankrate recommended that you look for a real estate agent who specializes in helping individuals purchase homes that are bank owned or short sale.
You should also be aware of the current local market conditions. Oftentimes foreclosed or short sale properties occur because the home prices in the region have fallen significantly. You should always be confident that you are making a good investment when purchasing a new home.
In addition, never overlook any issue you see when looking at homes. Ask for a professional opinion. You don't want additional unexpected expenses arising after you have completed the purchase.
Also prepare for the possibility of looking at homes that may be sold at an auction. Purchasing a home at an event such as this is an entirely different process. Having a real estate agent to help you navigate through an auction can help you successfully participate.
The importance of a home inspection
When purchasing a short sale or foreclosed property you must make sure that you hire a home inspection company to evaluate the current condition of the home. Asking a professional for an estimated cost for repair when a feature needs to be updated can help put you in a better position when making an offer, according to Bankrate.
Never assume that you found the perfect home and it is a great deal. A home inspection can help solidify whether it is worthwhile to purchase a specific home or whether the extra costs and upgrades needed are too expensive.
Bankrate also noted you may be getting into a hefty do-it-yourself project. In some instances, bank owned properties may have significant damage. Some owners may spitefully destroy their home before moving out or neglect may lead to vandalism, mold issues or infestations of animals or insects. Having a home inspection completed can help you develop an estimate of how much time and money will need to be invested in the restoration of a home.
Buying a short sale or foreclosed home may be an affordable option, but understanding the process and what it may entail will help you make a better-informed decision.