Finding a house that fits your wants, needs, and desires can be exhilarating. Finding a house for a bargain price can have you downright giddy. However, the process of purchasing that property can prove arduous. Houses considered distressed or in default are usually investor and house flipper's territory. However, if you are willing to do your research and leg work, you can find yourself a great deal, and working with a realtor will help as well. But when you find a property marked foreclosure or short sale, what next?
Know Your Terms
Short Sale, Pre-foreclosure, Foreclosure, and Banked Owned are all different, and you need to know the differences between them all to make informed decisions. Short sales are properties for sale where the owner owes more than the property is currently worth and the mortgage company agrees to take less than the current balance on the mortgage. The catch being, the sale price must be at or below the appraised value. All lien holders, no matter how many, must sign off on the buyers offer. This leads to an extended time-frame from offer to approval to the finalization of the transaction. If this will be your primary residence, you may not want to wait around to find out if your offer gets accepted. A pre-foreclosure, on the other hand, is a property that has been issued a default notice which is a matter of public record. There are subscription-based services that list current addresses that have received notices. These properties are not usually for sale at that time. The owner is behind on payments, but no proceedings have commenced. This is when a homeowner may want to consider putting the house on the market. This is not considered a distressed property at this point because the fair-market value is above the current mortgage balance. A sale at this point is good news all the way around but is rare. Often the pre-foreclosure that is on the market falls under the short sale category, and that is why buyers can be easily confused.
Conditions May Vary
As a buyer of a short sale or a pre-foreclosure, you need to know what you may encounter regarding pitfalls. The physical condition of the property may require extensive and expensive repairs that you will have to pay for yourself. Your lender may not approve of you because of the condition. You may be on the line for unpaid HOA fees, taxes, or liens leftover from the previous owner. So, if you can navigate all the issues that go along with these situations, then a short sale or pre-foreclosure may work out for you. Meet with your local real estate professional to get more information on these types of properties.
