how to buy a foreclosure or short sale

While a short sale may afford you up to a month to secure a mortgage after the seller accepts your offer, public auctions usually require the winning bidder to pay the full purchase price within 24 hours.
Most states require lenders to turn over bank-owned properties for public auction by the state, so finding foreclosures is much more difficult than finding homes available for short sale.
While a short sale is advertised and sold by the homeowner through conventional means, a property is owned by the lender where the homeowner’s loan originated.
While buying a short sale is a great way to score a home for sometimes significantly less than fair market value, waiting until the property actually forecloses can save you even more money–up to 30 to 40 percent off the fair market value, compared to the average 5 to 10 percent in a short sale.
A short sale is an arrangement wherein the seller accepts less money for a piece of real property than he actually owes on his loan.
To help more consumers win as buyers, Keller Williams agents are now offering a workshop, “Winning with Foreclosures," that shows buyers how to prepare to be successful buying the “distressed" properties—homes that offer, according to the survey, a 10 percent to 40 percent price advantage, depending on the local market.
The recent Keller Williams Distressed Property Buying Survey unearthed great information about where the opportunities are, how big they are, and how smart, capable buyers are leveraging the current market.
Buying a Foreclosure Foreclosed and foreclosing properties dominate many of today’s U.S. markets—more than four years after the sharpest observers saw the market shift coming, and more than two years after the reality hit home for millions of American home owners.
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Today’s Internet-connected, savvy buyer can learn a great deal about foreclosed and short sale properties before signing on the dotted line.
If you’re looking for a home in a market where inventory is tight, buying a home in foreclosure or short sale can be a great option.
Bringing more than a decade of residential real estate experience, DeSimone is a recognized national real estate expert and has appeared on top media outlets including CNBC, Good Morning America, HGTV, FOX News, Bloomberg and FOX Business.
In a bank foreclosure sale, also called real estate owned (REO), the bank is the seller.
You might find a great property you’d otherwise have overlooked if you categorically disqualified foreclosures and short sales.
It’s not unusual to find multi-million dollar homes in excellent condition and in good locations in foreclosure or offered in a short sale.
This can lead to a situation in which a buyer waits for months for the bank to approve the short sale, only to have the bank reject it.
Brendon DeSimone is the author of "Next Generation Real Estate: New Rules for Smarter Home Buying & Faster Selling," the go-to insider’s guide for navigating and better understanding the complex and ever-evolving world of buying and selling a home.
Meanwhile, the poor economy of the past few years has produced more properties in foreclosure or offered as short sales.
The old saying “no risk, no reward” certainly applies to foreclosures and short sale properties.
He has collaborated on multiple real estate books and his expert advice is regularly sought out by print, online and television media outlets like FOX News, CNBC and Forbes.
Brendon DeSimone is a Realtor & HGTV real estate expert.
If you are planning to buy a home and want to get a good deal (and who doesn’t?) you may have considered purchasing one sold through short sale or foreclosure.
Being a savvy buyer and understanding the risks and rewards involved can help you determine if purchasing a home through short sale or foreclosure is the right move for you.
This type of sale is often used by homeowners who cannot pay their mortgage and want to avoid foreclosure but are unable to sell their house for at least the mortgage balance.
Today’s Internet-connected, savvy buyer can learn a great deal about foreclosed and short sale properties before signing on the dotted line.
You might find a great property you’d otherwise have overlooked if you categorically disqualified foreclosures and short sales.
It’s not unusual to find multi-million dollar foreclosures or multi-million dollar short sales in excellent condition and in good locations.
If you’re looking for a home in a market where inventory is tight, buying a home in foreclosure or short sale can be a great option.
The old saying "no risk, no reward" certainly applies to foreclosures and short sale properties.
In a bank foreclosure sale, also called an REO (for real estate owned), the bank is the seller.
There may be absolutely nothing wrong with the property in foreclosure or sold in a short sale.
Foreclosures and short sales aren’t just your typical buyer/seller situation.
You can snag a great deal with either a short sale or a well-maintained foreclosed home, Daubenmeyer says, but one requirement remains: You must find a good real estate agent.
"The short sale is, in my opinion, far better than buying a foreclosure because the home is generally in better condition because it’s been occupied," she says.
Such deals are possible because homebuyers can negotiate closing costs and price in foreclosure sales, says Elaine Zimmermann, a real estate investor in Memphis, Tenn.
"If there’s a second holder on the short sale, that transaction can get ugly for a seller," says Carla Weyrick, a Realtor with Allen Tate Co.
Looking for a foreclosure-home price but in better condition? Sift through short sales in your local market, Daubenmeyer says.
Enter the federal Home Affordable Foreclosure Alternatives program, or HAFA, which helps the buyer and seller by speeding up the short sale process.
She recalls recently closing a short sale deal in 58 days through HAFA, and she knows other certified distressed property experts who have been able to close in 30 days or less.
Every entity that has a financial stake in the house has to agree to the short sale, she says.
Temecula, Murrieta and Hemet Real Estate super agent John C Lewis explains how to buy a foreclosure or short sale home without getting burned.
Nationwide, the average discount on homes sold in a foreclosure was 39% below conventional sale prices during the fourth quarter, while prices on homes sold in a short sale averaged 23% below market, according to RealtyTrac, the online marketer of foreclosed properties.
Cleveland was the hottest market among those looking to buy foreclosed homes during the last three months of 2012, with sales of bank-owned homes soaring 141% year-over-year.
While many of these properties will in fact sell for less than what you might consider “market value,” a perceived under-priced offering in today’s market is like chum tossed into the shark tank; every would-be buyer on the sideline, including a lot of well-financed investors, is jockeying for a piece of the action.
Remember, when we are talking about short sales (sales in which the seller’s proceeds will be less than his outstanding mortgage debt) and foreclosures (sales in which the lender is now the owner and seller), we are talking about banks in the position of ultimate authority.
Banks have to consider the costs of holding an unsold, non-income producing inventory or, in the case of the short sale, increasing this inventory through yet another foreclosure.
There are some great deals out there!” Or, your friend tells you, “I paid 150 percent below market!” And, except for the “150 percent” part (which most math majors will know is not possible), these statements have merit.
Great deals on foreclosures and short sales are definitely out there, but you may run into financing roadblocks when it comes time to buy.
At this point, the bank wants to sell the property to obtain fair market value.  However, the foreclosed home is often distressed and selling it at fair market value is unlikely.
Shorewest closing and title divisions are trained and versed in short sales and know how to streamline a sale to closing.
In the case of Bank Owned, or REO (Real Estate Owned) properties, the property has been foreclosed and the bank is now the owner/seller. This occurs when a home isn’t bought at auction.
Shorewest offers the largest knowledge base and amount of expertise in short sales.
Many agents have taken the Short Sales and Foreclosure Resource (SFR) certification course.
Further, the listing price of a short sale may be an amount the seller’s agent thinks the bank might accept – rather than the amount the bank has actually agreed to accept.
However, if the bank hasn’t actually approved the short sale yet at the time of your offer, implementing a deadline will be useless as it may take several months just for the seller to reach a short sale agreement with the lender.
One advantage to both the bank and the seller is that unlike a bank-owned property, a short sale property is less likely to be trashed or ransacked.
For the seller to increase the odds of the bank going through with the short sale, he or she may try to convince you to up your purchase price.
Unlike in a foreclosure, the bank does not own the property in a short sale.
If the seller has not actually gone into default yet, the bank may not be interested in doing a short sale.
However, because the bank must approve the sale (because it is the lender, not the seller, who will be taking a loss on the property) it will seem like the buyer is purchasing the property from the bank.
The bank may also not be interested in a short sale if it thinks it can get more money by going into foreclosure.
It takes a considerable amount of time and convincing to get a bank to agree to a short sale, so if it hasn’t agreed already, don’t waste your time.
A short sale is a deal that can be arranged before the property goes into foreclosure, at a time when both the lender and the borrower agree that this kind of sale (one that generates proceeds that are less than are owed on the property) is preferable to a default on the mortgage.
LaCava reminds potential short sale buyers that they’re dealing with a homeowners “who are in pain, who are losing their house and ultimately moving when they don’t want to, most of the time losing money that they had put into the property.
Buying a foreclosed or short sale property may be the right way for you to go, but not until you’ve done your homework and gotten the advice of both real estate professionals and the folks who have actually bought their homes this way.
Alessi’s experience has been that, in Nevada, “a majority of short sale homes are occupied by homeowners who upgraded the property with the intention of making it their dream home.” Also, homeowners are usually still living in the property, which means the utilities are still being used and the property is being maintained.
“Buying a short sale or foreclosure is risky but well worth the risk as long as buyers are informed ahead of time and prepared to take it to the finish line,” says Alexis Moore, VP of Blackstone Realty Group in California.
If you’re considering buying a foreclosed property or one that’s a short sale, your motivation is pretty powerful: the chance to get a below-market bargain on the home you’ve always wanted.
For someone who needs to make a move in a relatively short time, a foreclosed property is better than a short sale.
The short sale offer is not valid unless the lender approves it, so you have to be prepared to increase your original offer if you’re serious about closing the deal.
“Find out if the current owner has liens, such as HOA dues, private party liens, pool or home improvement liens, unpaid trash and/or sewer fees — all these need to be negotiated before the title is clear and the short sale can be closed.
Brian Horan, owner of California-based Kilbourne Properties, says that most of the people in short sale departments of banks are overwhelmed and “handling more files than are humanly possible.
First, an explanation of the difference between a between a foreclosed property and a short sale.
You might be thinking your short sale is a good deal, but the appraiser might be using a house that is further underwater than the one you want as a principal comparable.
Reiss’ last short sale took five months before an answer came, and the response was an offer $45,000 above the listed sales price.
Alessi thinks this is ”the perfect time to purchase a short sale, mitigate a loss for the banks and buy a great home.
Contrary to its name, a short sale home can be one of the most time consuming types of real estate transactions because the seller and lender(s) must agree to the terms of modifications of the seller’s mortgage obligations.
One of the best ways you can make buying again easier is to hire a qualified mortgage broker who specializes in doing loans after a short sale or foreclosure.
Credit bureaus are more forgiving if the loan is “settled,” like it is in a short sale, while in a foreclosure or a deed in lieu, a “default” is recorded.
A short sale and a foreclosure will have a negative impact on your credit score, but in every situation we have seen, the impact is less with a short sale.
The biggest impact to your credit is always caused by late payments and with foreclosures taking much longer than a short sale, there are more late payments for the credit bureaus to account for.
In Massachusetts over 80,000 homeowners lost their homes through a foreclosure or short sale since the housing crisis started in 2006.
That’s why lately we’ve had a lot of people ask us how soon they can purchase a home after doing a short sale or foreclosure.
The good news is you can buy a home after a short sale or foreclosure, but there are just a few eligibility requirements to follow.
Up to 3.5% in closing cost assitance is available strictly for people who want to occupy these REOs (real estate owned properties); this is not people looking for homes as investments.
There’s no place like home for the holidays – and that’s doubly true if you’re looking to buy a home right now! After being flat on its back, the housing market has come roaring back to life with a nice rise in home prices across much of the country.
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UPDATE: Wells Fargo is being sued by the Attorney General of New York for failing to comply with the terms of the National Mortgage Settlement.
But the banks are stalling this move for another 2 years! Long ago, The American Enterprise Institute put out a beautiful 1-page form that was all about transparency so you knew what you were getting into with a mortgage.
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When you buy a home or refinance one, you need a simple insurance policy that I just can’t get people to buy…even though being without it can be deadly to your finances.
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The listing agent might be able to submit revised documentation on the seller’s behalf that could alter how the bank will look at the short sale file.
A short sale happens when a seller’s lender agrees to accept less than its unpaid mortgage balance to facilitate a sale between the seller and buyer, and banks take a long time to decide.
Only then is the agent free to market the listing as an accepted short sale because banks rarely disclose a bottom-line price up front.
Typically, about the time the first buyers walk away, the sellers’ documents have already been submitted to the lender, and the lender may have been close to issuing the short sale approval letter.
Don’t get discouraged if the bank rejects your short sale offer.
I’ve had several listings where banks refused to accept short sale offers only to get title to the home through foreclosure, which then ultimately sold for tens of thousands less.
The way a listing agent finds out how low the bank will go is if an offer has already been accepted and the buyer walks away.

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