A Short Sale is when the seller approaches the bank requesting approval to sell their house for an amount that is usually less than what they owe on the loan, lenders have the final say and they must approve all purchase offers.
A foreclosure is when The Bank owns the home. The Bank owned property was likely acquired through foreclosure on the previous owner who was unable to make the payments according to their mortgage loan agreement.
With that said, most buyers seem to be having a hard time differentiating between the two and determining which is the best or them. Honestly both can be a great purchase option and have rewarding results for a buyer. The first thing a buyer should do is weigh the pros and cons of the Short Sale vs. a Foreclosure.
1. Typically a buyer could get the home up to 10+% below current market value
2. More time to sale your current home. This is because banks are notorious for taking long periods of time to approve the buyer purchase offer, which gives buyer more time to sale a home they currently have.
1. Prone to bidding wars, the lower price causes more buyers than normal which could end up inflating the price
2. The buyers offer will have to be approved and signed off on by the bank that’s taking the loss., a process and wait time when submitting an offer on a short sale could range from weeks to months to get a reply.
3. Often even after your offer has been submitted the listing agent will keep the home ACTIVE on the market, soliciting other offers which mean more offers could be submitted to the bank for approval. And since the bank can only pick on offer, you could end up waiting for months and then get turned down only to later learn that the bank accepted an offer submitted weeks or even months after your offer. Thus, this can be a major deterrent with purchasing short sales, to say the least!
4. Purchase at your own risk! Meaning you must sign an AS-IS addendum basically stating that the you the buyer assumes all risk associated with the condition of the property from the time of the offer acceptance. Buyers do have the right to inspect the property, but if something gets over looked the buyer not the seller is responsible.
1. In many cases, foreclosed properties are sold 20 to 50 percent below market price it’s a great opportunity for getting a bargain on a home. So, if you don’t mind putting in a little work to fix it up, purchasing a foreclosure can be a steal.
2. If you find a property that’s in the pre-foreclosure stage, your bargaining power can be increased by the seller’s sense of urgency. Buyers can request inspections (usually at their own expense), and can perform title searches at this stage as well.
3. Buyer s get a quicker move-in –time do to the fact that most foreclosures are vacant which means you can move in right after closing on the home.
4. Buyers could see huge profits as a result of buying at a discount meaning more profit for them when reselling; it’s a way to build faster equity in a home.
1. Buyers have a very hard time contacting REO/Bank owned listing Agents, As a result it’s almost pointless to call the REO agent and expect to get any answers. That’s why foreclosure buyers may fare better by hiring a buyer’s agent with experience in foreclosures to help them buy a bank-owned home.
2. Bank owned homes almost always have some degree of minor physical damage which usually is the result of a disgruntled previous owner who defaulted on their loan. It is becoming common that defaulting angry homeowners’ damage or destroy property in the home, they destroy plumbing fixtures, remove appliances, cabinets, light fixtures, ceiling fans etc. This is why its vital for the buyer to get an inspection.
3. Purchase at your own risk! Meaning you must sign an AS-IS addendum basically stating that the you the buyer assumes all risk associated with the condition of the property from the time of the offer acceptance. Buyers do have the right to inspect the property, but if something gets over looked the buyer not the seller is responsible.
4. Often even after your offer will be in a holding pattern while the listing agent keeps the home ACTIVE on the market for several days soliciting other offers. Once they have some predetermined number they submit all the offers including yours at once which mean multiple offers being submitted to the bank for approval. This can be a deterrent with purchasing foreclosed homes.
5. The existence of hidden Liens – usually, all former liens are wiped clean by the bank upon purchasing a foreclosed property. However, if liens exist on the home they could show up in the paperwork somewhere in the process, so buyers must do their due diligence by checking county records regarding this.
For more information contact me, ATLREALTORCHIC@gmail.com !