The facts about short sales and foreclosures.
A short sale is a sale of a property for an amount that is less than the amount of the loans that must be paid to satisfy all the mortgages on the property.
The seller gets to avoid foreclosure and the lender avoids the lengthy and costly process of foreclosure, the substantial delay in securing the ability to resell the property and the likelihood of considerable deterioration in the condition of the property.
The advantages of a short sale are that the property is usually sold under market value. Negotiate the price and ask that the bank pay for the closing costs. Usually, only one offer comes in at a time. The property may be in good condition – including appliances – if the seller still resides there.
The disadvantages of a short sale are the property typically sells in “as-is” condition; any offer is subject to the bank’s final approval; and it usually takes six weeks or more to hear a response from the bank.
A foreclosure is the termination of the owner’s right to a property, typically because of default.
Often this involves a forced sale of the property at public auction with the profits applied to the mortgage
debt. Most of the properties in Beaufort County, purchased at auction by the lender, hope to recoup some of the loan amount.
The advantage of foreclosures is that the property is usually sold under market value. Take advantage of your ability to negotiate price. Have the bank pay for the closing costs. Usually a quick turnaround time to hear a response from the bank occurs.
The disadvantages of foreclosures are that the property typically sells in “as-is” condition; bidding wars can occur, which can cause the property to sell above asking price; and furniture and appliances can be removed.
Short Sales vs. Foreclosures
Both short sales and foreclosures present an opportunity to purchase a property significantly under real estate market value. Get your offer in quickly and accepted in a timely manner.
This is where foreclosure properties have the biggest edge over short sales. Unlike a short sale where you first have to get the seller to accept your offer followed by lender approval, a foreclosure puts you directly in contact with a decision maker.
Short sales can be worth the wait, just make sure you and your Realtor have researched the market to see that it is the best opportunity available.
Short sales and foreclosures are worth a serious look, just keep in mind the best buys may not be distressed properties at all. Many times, the best buys are the ones where sellers still have equity in the property and are willing to negotiate based on property condition, incentives and price.
Article by Carey North