Buying a Foreclosure:
So you’re interested in buying a Foreclosed home? It’s best to know what you may be getting yourself into if you decide that a Foreclosed home is the way to go.
As you might expect, buying a foreclosed home comes with opportunities - and certain challenges. When you buy a Foreclosed home you're buying it from the bank that foreclosed on the previous owner. In the bank's mind, the property is simply an asset it needs to get off its books. The bank doesn't see it as a place to live or where someone raised a family or even where you'll potentially raise a family and make memories. Because you're dealing with a bank, not an individual homeowner, be prepared to wait for a few days, if not weeks, for a response.
Making an offer:
For the most part, the bank's agent doesn't even show the contract, the pre-approval letter or any of the offer pieces to the bank. Instead, the bank's agent inputs the data into a website or piece of software. The asset manager - the bank's seller of the property, in other words - simply sees the bottom line number. Are you getting the sense that this will be a highly impersonal process? Don't expect disclosures REO stands for "Real estate owned." An REO property is one owned by a bank after going through the foreclosure process.
Some homeowners may have struggled to keep the property or even attempted to sell as a short sale, but the bank wouldn't cooperate. The homeowner may have hard feelings toward the bank and therefore might felt justified damaging the property before leaving. You, as the buyer, will be responsible for any fixes. Don't expect the bank to give you credits or fix things Your offer and the likely discounted list price should already account for the risk you're taking on an "As is" property. As a buyer, your contract will allow you to have an inspection, so get the biggest and best inspection you can possibly have.
In The End
Be aware of what you’re getting into. There are many tempting deals out there among foreclosed homes. You should absolutely consider them — but make sure you’re not getting less than you bargained for.
Buying a Short Sale:
What Is a Short Sale?
A short sale is a property that sells for less than the balance owed on its mortgage. If there is a mortgage balance that is greater than the market value of the property, that property is considered a short sale.
Making an offer:
The most important thing to remember is that any offer you make on a short sale home will require 3rd party approval. In other words the seller’s mortgage company(s) will be making the decisions throughout the process. The seller will still have to sign all required documentation but they have NO power when it comes to a short sale contract. Again, all decisions/counter offers/acceptances, etc. will come from the seller’s mortgagor.
Written mortgage pre-approval is REQUIRED when submitting an offer on a short sale home. Make sure you have spoken to a lender and gotten pre-approved prior to making an offer on a short sale home.
How Much To Offer:
Be prepared to offer more than the asking price. Agents price short sale homes low to get buyers to make offers. Often times the competition of bidding against other buyers will require an offer above the asking price. Also, if the bank’s appraisal comes in above the asking price, they will counter offer at their appraised value.
Multiple offers may be accepted by the seller of short sale home but the bank will choose the one that provides them with the most proceeds.
Be prepared to wait up to 90-120 days (sometimes even longer) to get a response from the seller’s mortgage company as to whether or not your offer will be accepted/approved. Since the seller’s mortgage company is going to be settling the debt for less than what is owed on the home, the sale has to be negotiated by the seller’s agent and the process takes some time.