Why Look for Foreclosed Homes or Short Sale Property when there are many other good deals out there that might be cheaper, better and easier to obtain? Here are some common misconceptions about homes that were foreclosed on or being sold as short sales.
What is a Short Sale and a Foreclosed Property?
Foreclosure is a process, it’s the process the lender uses to transfer ownership after the borrower defaults on the loan. The lender can not sell the property before the foreclosure because the property is still in the borrowers name. The foreclosure process transfers it to someone else at the foreclosure auction at the county courthouse for cash. Normally the lender gets it back and now it is called a Bank Owned Home, not a foreclosure.
A Short Sale is a property, that when sold, does not sell for enough to pay off the current loan on it. The lender must approve this sale because they will have to agree to lose money when it sells.
- Banks sell homes based on what was owed on them. Wrong, they sell them at current market prices and they must compete with other homes being sold, so they are often not the great deal people think they will be.
- Bank Owned Homes are better deals than other homes being sold. Maybe not, often they have not been taken care of by the previous owner who was evicted when it was foreclosed. Some owners remove appliances, cabinets and worse.
- Short Sales Homes sell for less than list price. Maybe, the bank does not set the list price, the owner sets the listed price to encourage an offer and then it is shown to the bank to see if they will accept it. Often the bank wants lots more than it was listed for and buyers often don’t understand this.
- Short Sale Homes are quick to close. Wrong, nothing could be more incorrect. Often they take 3-5 months to close and sometimes they never close at all. Banks can ignore the short sale offers and move to foreclosure proceedings ignoring any offers to buy it. Short sales are frustrating to buyers in a hurry.
- If a Short Sale seller accepts an offer, so will the bank. Not true. The bank, or lender, does not have to accept any offer on a short sale, even a full price offer. The bank can accept it, ignore it, or ask for even more while waiting for more offers to come in.