Short Sales - forclosures

Could anyone tell me the advantages of buying this way? Anyone have any good stories to share? I need to move and have limited income. Anyone who went through with purchasing one- Is/was it worth it?

Re: Short Sales - forclosures

We brought a short sale and we didn't buy it because of any "advantage."

We liked the house and then found out it was a short sale. We were told it could be an extremely long process. Lucky for us, the stars aligned and the process was not as long as we anticipated.

The longest part was after the appraisal which came back lower than the approved offer. The bank decided to accept the apprasial price and we then went into contract.

I know that the process can be long. and you have to deal with a bank and not just the seller. I believe we are in the minority in that it was a relatively painless process.

Message edited 5/24/2011 11:49:25 AM.

Re: Short Sales - forclosures

A short sale just means that the seller owes more on their mortgage than they can sell the house for in today's market, so they won't have enough proceeds from the sale to pay the bank what they owe. The bank is involved because they need to agree to take the lower amount.

A lot of short sales are also pre-foreclosures -- the sellers have fallen behind on mortgage payments and can no longer afford the home (and the bank may have begun the foreclosure process).

I think the main advantage -- in people's perceptions, at least -- is that you can get more house for your money if you buy a short sale. However, I don't believe this is always the case now Banks do their own BPOs (basically like an appraisal) to figure out what the house is worth, and are not so willing to take less. Also, when a short sale first comes on the market, the bank wants to see that the seller tried to recoup the amount owed (which often means that the house is priced high for today's market). So it's not so easy to get a "steal." And, as the pp said, the process can be much longer and more complex (and there are definitely more uncertainties) than with a regular sale between seller and buyer.

With a foreclosure, where the bank has already foreclosed on the proprty, keep in mind that these houses often need a tremendous amount of work. They have been vacant, in most cases, for a long time, and usually need major structural and/or systems (electrical, plumbing, etc.) work. There is usually less room for negotiation with a bank on a foreclosure/reo property, because they've already incurred the cost (fees, etc.) of the foreclosure. With a short sale, it may be cheaper and easier for the bank to take the short sale proceeds and write off the difference than to go through the foreclosure process, so they may have more incentive to negotiate.

Also, I've heard other agents gripe that it's tough for the average consumer to buy a foreclosure. They are often sold in "blocks" (of 3 houses, 5 houses, etc.) to builders and investors, which is usually more profitable to the bank than doing individual transactions.

Personally, with prices and interest rates still low, I think the average buyer is better off NOT buying a short sale or foreclosure, but of course, every situation is different.

If you do it, you need to make sure you have an agent who understands the process (which requires attention to detail, paperwork, etc.).

Re: Short Sales - forclosures

Short sales can be good and bad. We bought our new house through a short sale. The benefit - we bought it at a significantly reduced price, because it was a DISASTER and the bank knew that no one wanted to touch the house with a ten foot pole.

The benefit for us is that we do most of the work ourselves, so we save a lot of money on renovations and construction costs. We bought the house, which is over 3000 sq/ft, on an acre of land, with an inground pool, in one of the most expensive neighborhoods in our area, for $320,000. We have kept our construction costs down to about $75k. So, in all, we will have a brand spanking new house, to our exact liking, with 5 bedrooms, 3 bathrooms, and a 3 car garage, all for less than $400k. To buy something like this in the area, it would cost close to $500k, if not more.

BUT, the only reason why it has worked for us is, again, DH is tremendously handy and does most of the work himself, with the help of one or two handymen.

The process itself wasn't all too lengthy, but I live in the Philly area, where it's much different. I will tell you this - you really do have to know what you're doing, or hire a very GOOD lawyer who is familiar with short sales. Every step of the way someone tried to swindle us out of money or scam us. I'm a lawyer, so I fought back and managed to insulate us from any fraudulent transactions. But you really do have to be careful.

If you're handy, and you have a great lawyer, it can work to your benefit. Otherwise, I would say, it's probably not worth it.