What is a Short Sale

What is a short sale?  A short sale is a sales transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan.
 
If you owe more money on the loan (and any other liens on the property) than the sale of the property will bring and you are unable to provide the additional money owed - you may qualify for a short sale.

If you are in this position, the lender has not yet foreclosed on your property, there is an opportunity to sell the proeprty in NOW, in order to at least partially satisfy the amount owed to the lender.

Buying a Foreclosed Home

Are you fascinated by the home makeover television programs that show the excitement of buying and renovating a foreclosed home? Have you seen foreclosed homes in your city that look like a good buy? Before you go out to the next courthouse auction to buy your next home or dream of flipping that house for major profits, be sure to do your homework. We’ve compiled valuable tips on navigating your options when buying a foreclosed home.

    * Pre-foreclosure
    * Auctions
    * Bank-Owned Homes
    * Buying from Government Agencies
    * General Tips
    * Other Resources
    * E-mail this Information to A Friend
    * Other Topics in the Consumer Focus Archive


Pre-foreclosure

In some instances you may be able to find a home in pre-foreclosure. In this case, you offer to purchase a house that is close to going into default and buy the house directly from the homeowner. The homeowner would sign the deed to the house over to you, and you would assume the mortgage and make any back payments due to the lender. Once the notice of default is filed with the county where the property is located, you can contact the homeowner via phone, mail, or in person. Some benefits of this option include:

    * You can conduct a title search before purchasing the property.
    * View the inside of the home.
    * Schedule a home inspection.
    * You can purchase the home at a discount (usually around 10 to 20 percent below the home’s value).

This option also benefits the owner because they are able to avoid foreclosure and salvage some of the equity in the home. Be mindful, however, that there is a short window of time to buy a home in pre-foreclosure so you will need to work fast.


Auctions

When people think of buying a foreclosed home, the image of potential buyers bidding on the steps of the local courthouse seems to come to mind. In this case, the seller of the home is not the owner of the home, but rather the financial institution or county that has not been paid by the homeowner. Auctions often attract well established and experienced real estate investors who have enough cash to fund the purchase, repair, and resale of the home. You can locate auctions through dedicated websites that list upcoming auctions, but many of them charge a fee to search their site. A sure way to get free information about the dates, times, and properties listed is to contact your county tax department. If you decide to purchase a foreclosed home through this method, here are some things to consider:

    * Know the maximum amount you are willing to bid and stick to that budget.
    * You will not be able to complete a home inspection or title search on the property, unless you completed it during the pre-foreclosure stage.
    * If you make the winning bid, you will have to pay for the property immediately with cash or a cashier’s check.
    * All sales are final.
    * There is the possibility that you will have to evict tenants/ residents. If you are unfamiliar with the eviction process, you should hire a lawyer to handle it for you.
    * You are responsible for any tax liabilities or second mortgages against the property.


Bank-Owned Homes

You can also consider buying a foreclosed home directly from the financial institution that issued the original loan for the house. There are various databases available online that can direct you to bank-owned real estate or you can contact banks directly and ask about their real-estate-owned (REO) programs. Buying a home this way is considered by some to be the safest way to purchase a foreclosed home.

    * You can arrange for financing. Consider being pre-qualified for a mortgage, if possible.
    * There are no other liens against the property.
    * You will not have to evict current residents.
    * Make your offer on the home subject to a home inspection to avoid structural and maintenance surprises.

You will have better luck negotiating a lower price on a foreclosed home that has been on the bank’s books for a long period of time (90 days or more). Once you make an offer on a home be patient, as it may take a while for the bank to get back to you.

Buying from Government Agencies

Several government agencies have collaborated to sell foreclosed homes to citizens through HomeSales.gov. The web site provides current information about single family homes for sale by the U.S. federal government. These previously-owned homes are for sale by public auction or other method depending on the property. Anyone can buy a home for sale by the U.S. Government, but you must work with a real estate agent, broker or servicing representative to submit an offer or bid. In addition, both HUD and Department of Veterans Affairs have foreclosed homes available to sell to the public. These homes are available for sale to people who will use the home as their primary home. However, if no one purchases a home for a primary residence, then the property may become available for investors to purchase. HUD also offers the Good Neighbor Next Door Program to help public servants (teachers, firefighters, and police officers) purchase a HUD home at a discount.

General Tips

Regardless of the method that you use to purchase a foreclosed home, here are some helpful tips that you should keep in mind:

    * Do your research. Before buying the foreclosed home do a title search to discover all liens and back taxes owed on the property. A lot of the information that you need is available for free from your courthouse or county records, so don’t get tricked into paying for the information.
    * Select a real estate agent or lawyer who is experienced with the purchase of foreclosures.
    * Compare the asking price of the home you are considering with the value of other homes in the neighborhood to make sure you are getting a good deal.
    * Know that there will probably be more paperwork involved when you buy a foreclosed home.