Ok, so we all know there are alot of short sales, pre-foreclosures, and foreclosures on the market. And purchasing one of these properties is a different process than a non-distressed property.
And there are so many on the market, if you are buying, you can't ignore them. For instance, in Riverside/Avondale 15% of active listings are distressed. In Springfield, 20% are and in San Marco 9% are. So lately, many of my buyers have been asking me how to navigate these. So here is the skinny:
What is the difference?
A short sale occurs when the seller owes more on the home than the home is worth in the current market. Any offer for purchase must be approved of by the bank and the seller's agent must make the case of the money owned being less than market value. Most banks will accept a short sale - it saves them time and money in the foreclosure process, which is generally where the seller is headed.
A pre-foreclosure is a property where the mortgage has become delinquent and is heading down the path to be foreclosed on by the mortgage holder. Anytime a homeowner becomes delinquent on their mortgage, and the delinquency hits the 90 day mark, that is when the mortgage holder can legally begin the foreclosure process. The entire time between the 90 day mark and the say the property goes to the foreclosure auction at the county courthouse steps is considered the pre-foreclosure stage.
A foreclosure is a property that is now bank owned.
Can Anyone Buy These Properties?
Yes. However, sometimes they are more difficult to finance because of the condition. Homeowners not able to make mortgage payments are generally not able to keep up with repairs on the home either. Most buyer's lenders and insurance companies will require the home to be in a certain condition. The seller or bank-owner in one of these scenarios is also generally not in a position to make repairs prior to close. Therefore, the purchaser of one of these properties should look into loan products that accomodate these types of scenarios. Wells Fargo is offering a great product right now, the Remodel Express, that can get one of these homes closed. Contact Wells Fargo loan officer, Mark Hendryx, for more information.
Also, first time home buyers getting any type of closing cost or down payment assistance money should steer away from these types of properties as they will not work in conjunction with the programs.
What Are the Positives and Negatives Associted with Purchasing One?
Time is a big factor. Generally because a bank or bank approval is involved, these properties can take several weeks to get a response back on an offer. In additon, once under contract, they can take 60-90 days to close, again because of the bank bureaucracy.
In addition, as mentioned above, the condition of the property can often be an issue with the buyer's lender and insurance company.
On the positive side, with patience and persistence, the purchaser can get a great deal.
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