A Happy New Year to everyone! How did you all spend the last day of 2013? It’s been a while since my last post but I hope that like myself, all of you have been able to rest and relax over the holidays and ready to face 2014 with new vigor!
Now I’ve been seeing a spike in activity on my website, and if you are some of the buyers that are looking to purchase a home by spring, surely you’ve encountered homes with ‘Foreclosure’ or ‘Short Sale’ tags while doing your home search. While you may have an idea about their difference, hopefully this article can shed a little more light and help you with deciding on your purchase.
Short Sales vs. Foreclosures
They are known as “distressed properties,” when in reality they are properties that belong to distressed homeowners. Foreclosed properties and those being sold short are homes that the homeowner can no longer afford, for any number of reasons. If you have your heart set on purchasing from among an area’s distressed properties, you may have to look a bit harder for them than you would have last year. The number of foreclosures on the market dwindled 22 percent in the first quarter of 2013 compared to the first quarter of 2012. The number of U.S. short sales has fallen 10 percent and is expected to keep falling.
Think the listing price of that short sale is set in stone? Think again. The list price is a concoction of the homeowner and the real estate agent. The only price that matters is that which the lender sets, and that won’t happen until there’s an offer and the lender sends out an appraiser. Much of the time the real estate agent’s evaluation comes very close to appraised value, but there is no guarantee. The list price on a foreclosure, however, is set by the lender, so unless you are able to negotiate for a lower price, this is the price the lender expects to obtain.
We all heard the short sale nightmare stories during the depth of the recession – all those poor buyers who were stuck waiting sometimes as long as a year or more to find out if their offers were accepted by the bank. While today’s short sales are considerably more streamline, they still take longer to purchase than a foreclosure. There are a number of reasons for the difference in timing, but the biggest is that there are more people involved in the short sale than the foreclosure.
Many homeowners trash their short sales before moving out, but not quite as often as do foreclosed homeowners. With no recourse against the “big, bad bank,” they’ll rip out fixtures, carpets and destroy walls. Then, the bank sells them – both foreclosures and short sales – “as is.” When purchasing a short sale, at least you can meet the owners and possibly find out from them what type of, if any, work has been done with the house. With a foreclosure you don’t get that chance. Both options require extra due diligence, ordering inspections of any of the home’s major systems that you have even the slightest doubt about. Inspections are the only form of “insurance” you’ll have with these purchases. Sadly, not everything can be picked up during inspections. Work with your real estate agent to find qualified inspection professionals.
Your best source of information on buying distressed properties is your real estate agent. Nobody knows the local market as well.
Hope that enlightened you somehow! Good luck with your home search this 2014!