Buyer's Guide to Short Sales, Foreclosures, and Bank Owned Homes

So you've heard all of the news reports about bank owned homes, foreclosures, and maybe you've even heard of short sales.  Great!  Now the question is do you know what they mean and do you know how they affect you as the home buyer or seller?

 Let's start with a timeline.  When a seller that does not have any equity in their home comes into a position where they "have to" sell they are in a situation they will progress through the following stages in order: attempt to short sale, court house auction if short sale fails, and finally their home will be owned by the bank if the first to stages fail to get the home sold.  In this blog I will deal exclusively with the pros and cons of short sales.

Short Sale - a short sale simply means that the seller is selling the home for "short" of what they owe the bank.  This means that any offer that is made on the home will require the seller and the bank to approve it.  The bank will have to agree to take the loss and often they will agree to do so if they determine the short sale loss will be less than the many costs of reposessing the home.

Pros for the Buyer -

1. You may be able to save thousands of dollars allowing you to lower your payment or to be able to buy a nicer home than you expected.
2. You can continue to look at alternative homes and you are able to switch to another home if the bank has not yet accepted your offer.

Cons for the Buyer -

1. The process takes approximately two months to go through just to find out if the bank will take your offer.  During this waiting period you may miss out on another home, the interest rates may go up, and you may find that you waited for nothing if the bank says no.
2. Because the seller is in financial trouble it is very likely that they will not agree to make repairs on the home so you will need to view your inspection as an informational exercise and assume the house is being sold "as is".
3. The seller can continue to take offers right up until the bank makes a decision so being the best offer at the beginning may not mean that you will be the best offer at the end.

There are some nuances to the short sale market but these pros and cons are the basic issues that will affect you as a buyer.  The opportunity is there to save money and find a great buy but I would recommend that you are in a position to wait for 2-3 months at a minimum to purchase a home this way.  You will also need to be someone focused on finding a bargain and not so much on finding your perfect home because it would be a bad idea to get to emotionally attached when buying a home through a long and unpredictable approval process.  For detailed information on this process please call me at               360-433-8656       .