Is a Short Sale, Foreclosure, or New Home the Right Choice?

Is a Short Sale, Foreclosure, or New Home the Right Choice?

When you are house hunting, there are different types of properties to consider:

      ·        Foreclosures

      ·        Short Sales

      ·        New Homes

Getting the best deal depends on the status of the market and how long you’re willing to wait to buy the house.  When housing inventory is packed with short sales, foreclosures and new homes sometime you can find sellers anxious to make a deal.  It’s true that every bank owned foreclosure is sold at a large discount or that every new home builder is slashing prices.  When all the different factors have been taken into consideration, it’s possible the best deal for you could be buying an existing house referred as a resale so make sure you don’t cut any house hunting choices out too early.  In order to maximize how far your money can go with buying a house, it’s essential to understand the market.  House prices are dependent on market dynamics.  You should ask yourself how much you’re ready to invest in a home. 

Short Sales

This is where the seller owes a higher amount on the mortgage than the value of the home and the lender accepts a lower price for the property in order to achieve a sale.  Short sales can offer some of the best deals available when you're looking at buying a house.  Despite the fact that government programs and lenders are attempting to hasten the process required to finish a short sale, it’s still possible for buyers to wait months, only to find out that they’re not getting the home. That’s partly why short sales are discounted, there’s a level of uncertainty for the eager house hunting buyer.  In comparison to traditional sales, short sales are generally discounted by around 5-8%. 

Bank-Owned Properties

These are foreclosures that have been reclaimed by a bank. They are usually sold at a reasonable discount, but the size of the discount depends on the market.  The typical discount that’s applied to bank-owned properties, in comparison to traditionally sold homes, is between 20-30%.  There are a few statistics that have been measured by different researchers on this subject, but that’s the general conclusion.  There’s multiple reasons why there is a lower price compared to traditional homes.  The seller is a bank so they want to sell the property as soon as possible compared to a home owner who has a particular price in mind and they will wait around longer in the market.  Another reason for a cheaper price is that foreclosures can be in poor condition since the previous owner wasn’t able to afford the mortgage.  The main thing to look for when buying a bank-owned property is the level of maintenance and repair that it will need and if the repairs help the value of the property.

New Homes

The supply of new homes in some markets is falling, which has led to a price stabilization.  That means that it’s harder than usual to find a bargain. The flexibility of builders’ pricing has lowered, and they’re less likely to negotiate.  There’s usually a 20% premium paid on new homes, in comparison to existing, traditional homes. This varies with a few different factors, primarily the location of the home.  Builders are, of course, still willing to find alternative measures to ensure a sale when you’re looking at buying a house.  They might throw in tempting features, like a finished basement, in order to sell their home. If the lowest price is what you want, this may not be your best option.