Much has been written about what a short sale or foreclosure means for a home seller. But home buyers in the market need to be aware of what this means for them.
Homebuyers, when looking for a home tend to shy away from foreclosures when in fact the savings that can be made by purchasing a foreclosed home can outweigh the risks and extra work involved. In a down economy some homebuyers can save big money when purchasing a foreclosed home. The average foreclosed home usually sells at 5%-10% less than the market price. Many lenders who have had a property on the market for longer than a month may be willing to waive certain fees in some instances even the down payment may be lowered. “The biggest benefit is that you can not only negotiate on the price, you can also negotiate for better closing fees, interest rates and be flexible on closing dates” states Jim Spellman of Real Living The Norwood Group, Amherst.
Buyers are often distracted by the cosmetic issues. Simple things such as painting, adding new trim or replacing the carpets are relatively inexpensive repairs and may also give the home a more appealing look. Other issues to watch out for are structural or mechanical issues. Often when a homeowner gets behind on their mortgage they also get behind on the maintenance and repairs of their home. This is why it is extremely important to have an extensive home inspection by a licensed professional.
In today’s economy it is important for homebuyers to know the difference from their perspective of short sale, a foreclosure and Real Estate Owned “REO”.
A short sale or a pre-foreclose occurs when an owner, for whatever reason is 30-90 days behind on their payments and is in default to the lender. The lender is not obligated to take a short sale and in most cases the process can be frustrating for the Buyers and Sellers. Buyers need to be aware that in a short sale, the purchase and sales agreement is with the current seller. However the sale is contingent upon the seller's bank approval. This can take time and is normally the source of delay with a short sale.
A foreclosure is when the lender takes possession of the property and the home owner is no longer a part of the sale. Foreclosures are not sold by Realtors but are auctioned at a trustee sale. A foreclosed property, at the time of the auction requires the buyer to put a deposit down with a cashiers check and obligates the buyer to close within a pre-determined time frame. When you purchase a home at auction it may come with many problems such as title problems, liens and sometimes tenants and owners still occupy the property therefore you may incur more costs and risks after you take over the property
REO (Real Estate Owned Property) is a property that has been foreclosed and has become bank owned. The property is listed by a Realtor who is hired by the bank, the lenders will often times remove any liens on the title and clear any issues that may slow down the sale. More often lenders are extremely motivated to sell these properties. Often times this is the best opportunity to find a good deal.
Knowledge is the key, do your research and do not be afraid to ask questions. Working with a Broker who is familiar with the process will also help to make the transaction run more smoothly. Understanding the foreclosure procedure will give you bargaining power. Anytime you purchase a home you should always look into the future. Making good choices now will save you time and money in the future when the time comes to sell the home.
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