Buying a foreclosure or short sale home can be a confusing process. Unlike a regular purchase, you and your realtor need to work with a bank in order to complete the sale. All realtors have training in buying foreclosed or short sale homes, but realtors with more experience in this area will be able to help you through the process more easily.
Why you should buy a foreclosure or short sale home.
It is no secret that you can get a great deal on a home when you buy a foreclosure or short sale home. You will be able to afford a larger home or a home in a better neighborhood. Not only does this benefit you in the short term with a lower mortgage payment and lower down payment, but also it will help you build equity in your home much quicker.
For a foreclosed home, many banks are willing to sell at an even greater discount, because the longer they hold the property, the more it cost them (in taxes, depreciation, and when assessing assets).
There is also a clear benefit of buying a short sale home over a foreclosed home – since the seller negotiates a deal with the bank, the seller has more incentive to keep the home in good shape.
Why you should not buy a foreclosure or short sale home.
While you can get a great deal, it may often come at the cost of expensive repairs or the responsibility for paying liens. Many foreclosed homes are in a state of disrepair because the seller has no incentive to fix the home and banks typically never repair these homes.
Also, if the previous owners have been evicted and the home is vacant, there is a high chance that it has been looted or vandalized, or more pervasive damage has taken place to the home, such as: frozen pipes, pests invasion, or mold. If the previous owners have not been evicted, the new buyer will have to undergo the eviction process, which can take additional time and legal fees.
Depending on the property, you may not be able to tour the inside of them, instead, you will have to judge the condition of the property from the outside. This can be extremely risky and may result in difficulty getting a mortgage.
Another issue that deters potential buyers from foreclosure or short sale home is that the process to buy can often take three to six time longer than a traditional purchase. Because buyers have to negotiate with and send offers through a bank, responses from the bank can take weeks or even months. Even the best realtor with years of experience buying foreclosed or short sale properties can encounter red tape, painfully long decision periods, or completely unresponsive lenders. During this time, many buyers do not put offers in on other homes for fear of having both offers accepted.