| Short Sale Information: What You Need to Know as a Buyer |
Short Sale Information: What You Need to Know as a Buyer
Are you looking to profit from the poor real estate market and the high rate of foreclosures? If so, those foreclosures may be your main focus. Yes, this is good, but look beyond them. There, you will find pre foreclosures and short sale properties. With these types of properties, foreclosure will happen. It is just a matter of when. Your first impulse may be to sit back and wait, but don't. Whether you are looking to buy a cheap first home or turn a profit, you can do so with foreclosure short sales.
As nice as it is to hear that you can turn a profit or buy a cheap first home with short sales and pre foreclosures, you may be looking for more information. If so, continue reading on for all the short sale information you need to get started.
What is a short sale? A short sale is when a property is sold for less than the outstanding mortgage balance. For example, a home with an outstanding mortgage balance of $75,000, may easily sell for $60,000 or less. Many property types are sold via short sales, but the most common are single-family homes.
Why a short sale? A short sale is an alternative to foreclosure. As previously stated, these properties are in pre foreclosure and it will happen. It is just a matter of when. Foreclosure has many damaging consequences to both the lender and the borrower. Borrowers suffer a severe hit to their credit rating and most later declare bankruptcy. Lenders get a property that may sit unoccupied for months. For them, foreclosure proceedings are full of hassle, long, and costly. Instead of waiting for inevitable, a short sale is decided on.
Why aren't all foreclosures offered as short sale properties? As previously stated, mortgage lenders take a loss when selling via short sale. These lenders want to unload the property, get a percentage of their money, and be done with as soon as possible. Often times, small lenders do not have an onsite staff to deal with foreclosure proceedings. Instead, they need to hire outside help, which can get costly. Any lender can offer a property for sale via short sale, but be sure to check with small, local lenders first.
How do I find short sale properties? Short sale foreclosures are sold two different ways, through either the mortgage lender or a real estate agent. Lenders may advertise for sale properties through newspaper advertisements, fliers in their offices, and on their company website. Real estate agents advertise a short sale property just like any other. They use advertisements in real estate sections, post the listing online, and so forth. When dealing with lenders directly, you know the home is a short sale or in the pre foreclosure stages. On the other hand, realtors sell a wide range of properties. It can be hard to tell right away.
How do I know a real estate agent is selling a short sale property? The easiest way is to ask. A good sign is when the selling price is lower than the home's appraised value. If it is, outright ask the selling real estate agent. Professional real estate agents know that short sales are popular with buyers, due to the good deals. They may outright state in the listing the property status or drop hints. These may include the phrases "pre foreclosure," and "lender must approve."
Can I get a better deal by bargaining? You may. Honestly, it will not hurt to try. If a short sale property does not sell, it will head to foreclosure. This gives you bargaining power. Want to pay less, make an offer.
Should I have the money to pay upfront? Yes, but it is not required. If you have the needed financial resources on hand, a mortgage lender is likely to accept your purchase offer. In fact, on hand financial resources gives you added bargaining power. If you first need to secure financing, the buyer will review your application for financing, wait, and then make a decision. Although upfront funds are not required, it can help speed up the sale.
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