A short sale occurs when sellers don’t receive enough cash from buyers to pay off their existing mortgages, and lenders (banks) agree to take less than the amount owed them. Lenders facing a surge in delinquencies are increasingly willing to accept short sales to avoid costly foreclosures or having them become “Real Estate Owned” property, or an REO.

 

When a notice of default on the loan(s) has been recorded in the public record, it is in “foreclosure.” This means that the owner has stopped making mortgage payments and the lender has given official notice that unless the payments (usually two payments in arrears) are brought up to date, the lender will sell the property to the highest bidder. Not all homes in foreclosure go to public sale, as owners have the right to make back payments up to a specific time.

 

Although foreclosures are listed at tempting prices, note these kinds of purchases have some common pitfalls that may make them risky. Working with a top-notch buyer’s agent is more important than ever when you are considering buying a bank owned property. Some of the risks of purchasing these properties are:

 

Although it is usually possible to inspect a property before making an offer, many REO properties have been neglected if not outright damaged.

 

Banks that own REOs are often understaffed. Many fail to respond in a timely manner when offers are submitted. They may insist that certain conditions be met, including firm closing dates with penalties if the dates are not met.

 

Title companies are usually out of the area, where standards of practice are quite different from our own and they lack knowledge of our point of sale ordinances that include sewer lateral compliance, city transfer taxes and the like.

 

Keep in mind that foreclosures are strictly sold “as-is.” Banks are selling off bad assets and are not looking to spend time negotiating. Even if the listing has an outdated kitchen, stained walls, or damaged carpets, don’t expect a discount! Be prepared to accept the listing at the asking price.

 

For first time home buyers, foreclosures are an opportunity to own when many had thought the opportunity had passed years ago. Though the market for foreclosures is competitive, Marvin Gardens agents have advised and helped many buyers considering a short sale or bank-owned home Speak to a Marvin Gardens’ real estate agent today if you’re interested in purchasing a foreclosure.