The Facts on Foreclosures.
The Skinny on Short Sales.
These days, you hear a lot about short sales and foreclosures. Seasoned investors know exactly how to capitalize on these buying opportunities. But if you’re new to the real estate market, or considering a short sale of your home, it’s important that you understand the process.
The Road to REO: When a homeowner defaults on a mortgage loan, the lender may have the property sold as a means of paying off the debt. The property then becomes a real estate owned (REO) foreclosure. While a bank foreclosure is being processed, owners may try to sell their homes to avoid foreclosure and protect their credit. For an investor, this pre-foreclosure period is a great time to negotiate the best possible price.
Buying at a bargain: If the home is not sold before the foreclosure is processed, the title is transferred to the bank. It is often possible to negotiate deals at a price below market value. Buying foreclosed properties is relatively risk free, since the bank has a clear title to the property. Just make sure that you have the property inspected and take into consideration the cost of repairs needed.
An Alternative to Foreclosure: In a short sale, the lender allows a homeowner to sell the property at market value. Although the sale price may be lower than the balance owed on the home, the lender agrees to it because they will have better chance at recovering their money. For a homeowner, this option halts the foreclosure process. Meanwhile, for a buyer, the prospects of getting more for your money are quite high.