Tempted by a Short Sale or Foreclosure

If you could buy your dream home and save $200,000 or more, would you be tempted? For many retirees, the news reports of homes selling for half what they were 3 years ago are interesting. In fact, in many areas of the country the prospect of a bargain-priced distress sale has become so attractive that sales of new homes have just about stopped. In case you are thinking about plunging in yourself, we have prepared some background on the issues involved in this topic for our Topretirements.com visitors.

Short Sales:
– A short sale occurs when a home is sold for less than the remaining mortgage on the property.
– The tricky part is that lenders have to give permission for a short sale, which can be used to avoid a foreclosure. If the loan has been syndicated to many lenders – paralysis usually results
– Short sales tend to be good things for sellers, who preserve their credit ratings and their dignity (but sadly, losing all of their equity)
– They also tend to be good for banks, which avoid the expense of foreclosure and often get more for the property
– Short sales are often bad for buyers, who can get strung out for weeks or months by the banks or the multiple parties who own the mortgages
– Loan service companies can find themselves getting hurt by short sales, so they are often against them
– The Obama administration’s latest proposals are aimed at simplifying and rewarding short sales, an idea which is getting a lot of support from the financial and consumer protection sector
– In some parts of the country about 10% of the sales are short sales

Foreclosures:
– A foreclosure sale occurs when the borrower defaults on the mortgage and the lender takes over ownership
– Foreclosures often result in the best price for the buyer, for a multitude of reasons
– In some parts of the country over 50% of the sales are foreclosure sales
– A big reason for the low prices is that there are so many properties the bank’s can’t do a good job marketing all of them, they just want to get rid of them – fast!
– Chaotic markets and imperfect knowledge can work for (or against) you as a buyer. If you have superior knowledge about a particular home or neighborhood, you have a potential advantage

Tips from all over
– The sharks are feeding. Get a good real estate agent working for you if you don’t want to be eaten alive (“don’t try this at home”). An agent with experience in foreclosures and short sales is not only essential for your protection, but they have will access to properties you couldn’t find on your own
– You snooze, you lose. Foreclosures and short sales happen fast. If it’s your dream home, don’t dally
– Check out real estate firms and banks for lists of foreclosed properties in the communities you are considering. Or, keep your ear to the ground and take the initiative
– Don’t buy in a distressed neighborhood or one with a lot of other foreclosures
– Whatever you are buying, you are buying as-is. Any problems will be your problems now
– If buying a condo or there is a Homeowners Association, do your due diligence. Find out if there are many other bankruptcies or delinquencies in the development. How about their reserve funds; can they withstand an emergency without an assessment? Don’t fool around with a weak development.
– Harry Murray, vice president/manager of the J. Rockcliff Realtors office in Danville, CA told MercuryNews.com that “Investors account for more than 60 percent of the foreclosure buyers, (and) new sales are dead.

Bottom line:
Bargains exist out there, if you have the courage and the skill to find them. Act fast if you find your dream, but protect yourself.

Prediction:
After the dust settles the next investigation will Congress undertake is to find all the sweetheart deals that insiders made in this chaotic market. With the sheer volume of what is going on and all the uncertainty, insiders will always try to profit.

More References:
Foreclosure Market Offers Bargains for Savvy Investors

Foreclosures Hit Home on Cape Ann, Short Sales Aid….

What’s your opinion? Please use the “Leave a Comment” box below to share your ideas on short sales and foreclosure opportunities.