Short Sale Vs Foreclosure

I wanted to take a moment to talk about Short Sales & Foreclosures, although our inventory is not overwhelmed as it was once by them their are still some of these listings on the market.  Buyers who are looking to make a purchase often times think that these are impossible sales, which they are not but unfortunately they can be time consuming.  This blog will not only explain exactly what these kinds of sales are but some of the pro's & cons of these sales as well.  

Short Sale: Where the homeowner has proactively decided to sell their home in order to avoid foreclosure.  This kind of sale gives the homeowner the right to negotiate offers before they are submitted to the bank, but the bank will have the final say on whether the offered price is acceptable.  The homeowner might have the difference between the loan amount vs sold price, and in some cases will immediately be able to obtain a loan on a new home.  

• Pro - These homes are typically mortgageable thru FHA, Conventional, or 203K Loans.  
• Pro - Homeowner will be able to give helpful information about the home including age of appliances, fixtures, or provide paperwork on warranties.  
• Pro - You can usually purchase these homes at a lower price than market value, usually between 5% - 8%.
• Pro - Typically these homes are still being occupied and maintained by the homeowner, and they will be responsible for their belongings including garbage being removed from the home. 

• Con - Timeline for bank approval is an unknown it can take anywhere from 3 months to 12 months to purchase a short sale home.  
• Con - Although the homeowner has the option to give you information they are not required to fix or represent any items in the home.  
• Con - Although some homeowners may have listed their home, sometimes getting in to see the home for a private viewing might be difficult.  

Foreclosure: The homeowner has normally vacated the home and the bank will either A. Hire an agent to advertise the home or B. The home will be sold at a public auction (Real Estate Agents Will Have Access To The Foreclosure Auction Schedule).  The homeowner is no longer involved in any way with the sale of them home, and will be held responsible for the difference between loan amount vs sold price, and will not be eligible for another home loan for 5-7 years. 

• Pro - The timeline to purchase a foreclosure is typically much quicker than the process of buying a short sale.  
• Pro - Most of these homes are very easy to see because they are shown with a Lockbox Code or HUD Key.  
• Pro - These homes are generally sold at a significantly lower price than market value because of the deterioration of the home.  

• Con - These homes typically will need to be purchased either with cash or a 203K Loan.  
• Con - These homes are also sold as-is, this includes any garbage or debris left in and around the home. 
• Con - Many investors will come into the auction with the ability to purchase that day and close within 2 - 4 weeks which can hinder a buyer with a mortgage being able to "win" the home.  

Tips For Purchasing A Short-Sale

• If you are looking to get the home at a good price, and a quick bank approval than looking at Approved Short Sales are a great option, because the bank has already agreed to price.  
• Although the homeowner can give you information, don't skip the home inspection.  You will want to make sure than those "small" issues will not put you over budget after the repairs have been made.  
• Before submitting an offer to the bank take a look at the comparable homes in the area and keep your offer within 10% of market value.  The bank will be basing their decision on your offer on a 3rd party appraisal telling them the current market value of the home.  
• Make sure you utilize a Buyers Agent, they will be able to find out necessary information that will help you choose a viable short sale by checking key information such as: Sellers Attorney, Which Banks & How Many Banks Are Involved, How Co-Operative Will The Homeowner Be.