Things you need to know when considering buying a short sale or foreclosure property:
Some investors love short sales. The right short sale can be an excellent property to rehab for either flipping or to put up for rental. The transactions can be lengthy, but the rewards can be substantial. Before considering your first short sale transaction, you should educate yourself about what a short sale actually is.
A short sale means the seller’s lender is willing to accept a discounted payoff to release an existing mortgage. However, just because a property is listed with short sale terms, that does not mean the lender will accept a buyer’s offer, even if the seller accepts it. Buyers pursue short sales to get a good deal, but lenders are reluctant to accept offers that are below the current fair market value of the property. The amount of repairs can end up being a considerable factor and the lender may end having to consider lower offers due to this.
Short Sale properties tend to present a variety of risks for a home buyer. Homes are frequently sold “as is”, which means that no repairs will be made by the seller or lender. Therefore, most agents recommend a home inspection to determine the true condition of the home and to get an estimate of repair costs.
Overall, the short sale process tends to be lengthy, and in some real estate markets, fewer than one in 10 short sales close for a variety of reasons. The entire short sale process can be very challenging; however, working with a real estate professional who is experienced in short sales can increase the odds of a successful close.
A buyer considering a short sale should consult with an attorney and/or a licensed tax professional to understand all obligations relating to a short sale.
If you’re thinking of buying a foreclosure home we will be doing some intense searching depending on your criteria and financing options. There are some foreclosed homes that are in awesome condition, but these sell incredibly fast, and usually to cash buyers. Be aware also that sometimes homeowners are very upset that their home is going into foreclosure. They take it out on the lender – and the home – stealing everything from the windows to the crown molding, kicking holes in the sheetrock and doors, and sabotaging the home by leaving water running, etc.
Foreclosure homes are great if you can get the right financing. If you have cash, awesome! But, if it’s a real “fixer upper” and you need financing your lender may want it fixed before they finance it. So, if you don’t have cash for the deal you really need to talk to a lender first. Also, the original lender is out money already, so foreclosure homes are sold “as is” (you can still have an inspection done and get out of the contract then.)
If you’re buying a foreclosure home from the sheriff’s sale – watch out for other liens attached to it. That means other people or companies are owed money – and in many cases, you’ll need to pay or settle that up before the property can be all yours. If you’re buying a foreclosed home through a realtor who is listing it for the lender, those liens have already been cleared up.
ATTENTION FLIPPERS: If the house to be rehabbed is to be eligible for certain loans, such as an FHA loan, the deed may not be able to change hands for 90 days. This means the property is going to be yours for 3 months before you can turn around and sell it to a buyer financing with an FHA loan.