What is a Foreclosure?
In today’s Real Estate market foreclosures are becoming more and more common. A foreclosure is a house where the owners, for whatever reason, discontinued making their monthly mortgage payment. Over time the bank will take the house back forcing the occupants to move out. The bank will then try to sell the house to the public, usually at a small discount, just to get it off their books.
When starting your house hunt for a foreclosure you need to be aware that many of these homes are distressed properties that need a ton of work. The previous owners often strip down and/or damage the inside of the house in anger leaving the home uninhabitable. Foreclosed homes are often vacant for a long period of time so they can have unpleasant odors and be very dirty. You need to keep an open mind and look at the possibilities while viewing bank owned homes. Also be aware that most foreclosures are sold “As Is” meaning that the bank will make no repairs to the home prior to selling it. If you are looking to purchase a foreclosure make sure you set aside plenty of money for cleaning and repairs of the property.
The purchase of a foreclosure is really no different than that of any other home other than you are purchasing it from a bank rather than a person. One thing to keep in mind when submitting an offer on a foreclosure is that other people may also be making offers on it especially if it’s a really good deal. Many foreclosures end up selling for more than the listing price.
What is a short sale?
Short sale is another very common term used in today’s Real Estate market. A short sale is a home that is in jeopardy of being foreclosed on. The owners are most likely going to lose their house to foreclosure if they do not sell it so they will ask the bank to take less than they owe on it. The main thing to remember is that the bank needs to approve the sale price. This can often take months. It is very common that the house goes into foreclosure before the bank makes a decision about an offer. In this case all bets are off and the house is pulled off the market. If you have a lot of patience and time there are some good deals to be had in short sales but they are very hard to get.
While house hunting you need to remember that unlike foreclosures short sales are not usually distressed properties since the owners are very desperate to sell. These homes are going to be more appealing to people since they are in better shape and are underpriced. For these reasons short sales usually result in multiple offers. With a good deal comes a lot of competition. To avoid disappointment just remember there are no guarantees with short sales.
There is such a thing as a pre approved short sale in which the bank has already approved the sale price and you can purchase it like you would any other home. If a home is a pre approved short sale it will be noted in the listing. These are not very common and there really isn’t much of a chance at getting the house at less than the asking price.
Before purchasing a foreclosure or short sale make sure you do a lot of research and hire a realtor who is very experienced. You will want to look at the comps and make sure you are getting a good deal. Lastly, make sure you have the house inspected so there are no surprises.