The Beginner's Guide to Foreclosures and Short Sales
Foreclosures and short sales grab buyers' attention due to their (typically) low prices. They are different terms, though, and require familiarity and experience in order to go smoothly.
First, definitions:
Short Sale: The owner owes more on their home than it is worth. This is "pre-foreclosure." The owner is trying to get as much for their house as is possible in an effort for it not to be turned over to the bank.
Foreclosure: The owner failed to pay for their house (whether they tried a Short Sale or not) and now the lender is trying to recover the balance on the loan.
Short sales are not short. This is because the offer you make on the house needs to be approved by both the seller and the bank. The seller is usually quick in responding, after all, they want what they can get for the house. The bank, however, can take months to respond to one offer. This can turn in to quite the waiting game, and usually means the buyer continues looking for another home in the meantime.
Foreclosures are owned by the bank. Because the bank only cares about the money, they usually price their homes low to generate a quick sale and do not provide property disclosures, usually offering the home "as is".
Foreclosure process:
A foreclosure is either a Judicial (sold from a court) or Nonjudicial (those owed money are allowed to hold the foreclosure)
Then the foreclosure can be posted "for sale" or go to an auction. If it goes to auction, like here, the highest bidder receives a deed to the property. Unlike the short sale process, buying a foreclosure is relatively quick.
Myth: All foreclosures are fixer uppers.
Truth: A foreclosure happens when the owner has stopped making payments. A well-kept home is just as likely to go into foreclosure as one that has not been taken care of.
When choosing a home, be sure to know the time frame in which you need to buy. You should know if a short sale is an option, and if you are ready to go through the bank in the case of a foreclosure. As your realtor, I will be with you through it all, so ask plenty of questions!
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