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Posted in Foreclosure News

Foreclosures VS Short Sales

Most people know that real estate can help build a families financial abilities.  Families have used the equity in their home to start a business, put the children through college, pay off other debts, buy a car or even purchase other real estate.

That knowledge and understanding of what home ownership or real estate ownership can do for you causes many to want to make that investment.

So here we’re going to look at 2 options that have people talking.  We’re comparing foreclosures and short sales.  We’ll try to answer your questions.

Foreclosures –

Let’s take it from the beginning.  When someone or entity wants to purchase real estate, they find the property then go for a loan (mortgage) to acquire that property from the seller.  That property is used as collateral for the loan (mortgage).  This mortgage can be made through banks, insurance companies, other entities or individuals.

The lender requires payments on that mortgage, if the borrower doesn’t make their payments the lender is allowed to start the foreclosure process.  That’s right the foreclosure is a process that allows the lender to gain possession of the property.  Joining our members you’ll find foreclosure property information throughout the United States.

Short Sales –

Up to til the time the title changes hands the home owner still has control over the property.  A foreclosure can take up to 2 years to be finalized and the property sent to auction.  During that time period the homeowner might want to end the foreclosure process and move on.  One possibility is to sell the property.

A short sale is a means of selling the property.  The mortgagee(s) (financial institution, individual) and all lien holders would have to agree to the short sale.  This would require the mortgagee(s) and lien holders to accept a lower price than is owed on the mortgage to be an acceptable selling price.

This requires a lot of paperwork, forms and documents.  Remember the mortgagee, more than likely, would receive a much lower amount than the mortgage loan.

What’s better to buy a foreclosure property or a short sale property?

The foreclosure process can be a long process.  There can be many court appearances, the emotional stress of losing your home.  The possibility of a marshall (depending on the jurisdiction) coming to your home to move you out.  There is a special pain that comes over people who’ve lost their home to foreclosure.

With a short sale it’s something that you can prepare for because once you go into contract it functions just like any other sale.  In many cases the mortgagee have given the homeowner (seller) a small amount of money $3,000 to $5,000 at the closing.  The homeowner can walk away saying that they sold their house.

How does a short sale or foreclosure effect your credit?

A foreclosure has a serious hit on your credit report.  Your score can drop quite dramatically.  Remember the foreclosure is similar to the repossession.

The short sale is recorded as a sale.  That’s it.

How to find and/or purchase a foreclosure or short sale property?

Foreclosures are available nationwide.  According to Attom Data Solutions there were 362,275 US properties with a foreclosure filing in the first six months of 2018.  That total is much lower than the peak of the housing collapse in 2010 of more than 1.5 million foreclosures in the first six months of that year.  There are still 100’s of thousands of foreclosures out there.  You can check with financial institutions if your looking to find a property, or you can just join Foreclosures Auctions that provides links to bank foreclosure information.

Finding short sales is much different.  The short sale market was quite active during the years 2006 to 2010 when there were many houses “underwater” (meaning the mortgage was more than what the house was worth).  Many people that were in that situation sold their property years ago, just walked away, or managed to go into mediation with the bank to do a loan modification.

Are there secrets to buying a foreclosure property?

No, not really.  The thing about buying a foreclosure property is to deal with certain issues first:

  • Decide whether you want a property for personal use (home) or investment (rental), or flipping,
  • do the research into the areas you might want to own a property in,
  • use the internet to figure what’s a good price for  the type of property your looking for,
  • determine how much you’d want to spend to purchase the property,
  • make a visual inspection of the property, you might want to bring a professional,
  • determine how much you’d want to put into repairs on the property,
  • learn the specific process of purchasing a house from the institution or government that owns the foreclosure

Your due diligence makes a big difference in whether you get a diamond in the ruff, or a dud.

Foreclosures VS Short Sales Summary

Remember finding your properties early is very important in the buying process.  No bank or lender wants to hold onto a foreclosed property, there’s no money in that.  They want to get rid of the property.  Many jurisdictions require the owner to maintain the property, and continue to pay the taxes or other expenses on the property.

ALSO: This is something that you should keep in mind if you’re thinking about finding a short sale property the Home Affordable Refinance Program (HARP) that was created by the Federal Housing Finance Agency to help homeowners that were in properties that were under water (mortgage is more than the property was worth), or to put it another way had little or negative equity, has ended 12/31/2018

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