Buying a Short Sale
A lot of people believe buying a short sale is the best approach for getting a bargain on realty. The truth is working with banks to acquire homes that have entered into pre-foreclosure is a lengthy process that often leads to frustration and rarely provides substantial savings.
While there are exceptions when buying a short sale can yield a good deal, for the most part it is usually easier to invest in properties that aren't in default. On average, it takes at least two to four months to close on short sales once an offer has been accepted by the seller's lender.
Getting banks to accept purchase offers ranges from two weeks to several months. According to RealtyTrac, the short sale process takes 306 days from the time an offer is presented until the sale closes. Most people aren't willing to wait nearly a year to take possession of a house.
Furthermore, buyers rarely obtain any perks such as having home inspections, roof certifications, or other closing costs paid for by the seller. Pre-foreclosure short sale homes are sold in 'as-is' condition and buyers are responsible for all costs associated with returning the property to livable condition.
Inexperienced buyers often perceive short sale properties to be a bargain based on the previous purchase price. They believe if a house sold for $250,000 and is now listed at $125,000 that they will acquire home equity of $125,000. This isn't the case at all because housing prices have seriously declined since the mortgage crisis began in 2008.
The majority of buyers that purchased homes during the subprime lending heyday overpaid for properties. As housing prices continue to fall many homeowners are now stuck with mortgages that are double or triple the amount of today's current market value.
Obviously, banks aren't eager to accept purchase offers on short sales for less than fair market value. Instead, buyers should be prepared to offer more than the listing price because there is a high probability that multiple offers will be received.
Anyone that wants to proceed with buying a short sale ought to work with an experienced short sale agent. It's important to note that not all realtors handle short sales. In fact, many agents avoid them like the plague because they have to do more work for less pay.
Buying preforeclosure homes is considerably more involved than buying homes for sale through a private seller. Realtors need to have experience in working with bank loss mitigators to ensure that the property qualifies for short selling and to expedite the closing process.
Two options for finding short sale homes include Fannie Mae Homepath properties and Freddie Mac homes offered through the HomeSteps program. These government sponsored programs help distressed homeowners get out of underwater mortgages and assist buyers by providing special mortgage terms when purchasing short sale and foreclosure real estate.
Buying distressed properties through these programs typically doesn't take as long and offers buyers additional benefits such as reduced down payments and closing costs. In fact, effective June 15, 2012 new guidelines set forth by the Federal Housing Finance Agency will require lenders of mortgages backed by Fannie Mae and Freddie Mac to respond to short sale offers within 30 calendar days.
As you can see there are multiple factors involved with buying short sale foreclosure homes. As with any real estate investment there are pros and cons to buying distressed homes, so it is vital to give careful thought to determine if this is the best option.
To help visitors figure out if buying a short sale home is a good choice or not, we have put together a comprehensive short sale article library that outlines the benefits and drawbacks of buying bank owned realty. Go here now to find out more about the process, along with other home buying options.