First Time Buyers Short Sales - 5 Reasons to Examine Short Sales

Are you looking to become a first-time homeowner? If so, you may turn to foreclosures to save money. Unfortunately, foreclosure auctions are often jam packed full of professional investors. Yes, you can still try to buy a home in foreclosure, but the best option is to opt for a foreclosure short sale instead.

A foreclosure short sale is when the borrower and the lender agree to quickly sell the home. It is used as an alternative to foreclosure. To avoid poor credit markings and to avoid lengthy and costly foreclosure proceedings, both parties usually agree to a short sale. To quickly sell the home, its price is greatly reduced. Some mortgage lenders do take the home’s appraised value into consideration, but others opt for an amount near or smaller than the outstanding amount due on the mortgage.

So, why should you, as a hopeful first-time homeowner, target foreclosure short sales?

1 – Wide Range of Properties Available for Sale

It is most common to see single-family homes offered for sale via a short sale. With that said, you never know. Landlords are also struggling with the poor economy. Some are making poor financial choices and others are stuck with non-paying tenants. Not only can you find single-family homes for sale via short sales, but multi-family homes too. If you not only want to own a home, but profit too, live in one of the apartment and rent the other.

2 – Cheap Properties

As previously stated, foreclosure short sales are an alternative to foreclosures. Mortgage lenders have accepted the fact the borrowers cannot and will not pay them. Instead of taking a total lost and spending months and thousands of dollars in foreclosure proceedings, they agree to a short sale. In doing so, they are willing to take a small loss. This results in cheap properties for you.

Yes, short sale properties are sold at a reduced rate, but be cautious of those sold through deceitful lenders or real estate agents. They try to up the price and make more money. Before agreeing to a foreclosure short sale, compare the selling price with the home’s appraised value. It should be less.

3 – Typically Well-Kept Homes

Borrowers who approach their lender for a short sale are responsible individuals. They have just fallen on hard times. They are concerned with the short-term and long-term financial impacts of foreclosure. These individuals care, unlike those who sit in a home that they cannot afford waiting for an eviction notice. What does this mean for you? It typically means a well-kept home.

Those who opt for foreclosure short sales care about themselves, their reputation, and take pride in their home. They just can’t afford it any longer. These individuals take care of the property. On the other hand, it is not uncommon for those who receive an eviction notice during foreclosure to become unruly and even damage the property. In this instance, it means costly repairs.

4 – Can Profit Later

If you are a hopeful first-time homeowner, your goal is to find an affordable home, not make a profit. With that said, don’t forget about the long-term aspect. In five or ten years, you may wish to purchase a new home or relocate across the country. This involves a home sale. If you only paid $100,000 for a home valued at $200,000, you automatically make a profit. Throughout the years of owning and living in the home, upgrades are likely. These upgrades will only increase the home’s value, meaning more profit for you.

5 – Bargaining Power

If you are in good financial standing, have the ability to obtain financing, or have the needed financial resourced on hand, you are in a good position to bargain. If you know the property is being sold as a short sale, research the home’s appraised value. This should be on file with the mortgage lender, real estate agent, and should be public record. If you aren’t getting what you deem to be a good deal, bargain. If dealing directly with the mortgage lender, ask about obtaining financing through them. This result in a continuing relationship. If you have the needed financial resources on hand, state your price and offer to make payment right then and there.

How to Convince a Mortgage Lender to Agree to a Foreclosure Short Sale

In the United States, most properties are sold through professional real estate agents. However, many list their homes or properties for sale by owner. Most do this because they have complete freedom over the sale. They can choose how much they want to sell the property for, to who, and when. With the current state of the real estate market, many selling their homes are doing so to avoid foreclosure. They simply cannot afford the property anymore. A sale prevents foreclosure.

If you are looking to buy your first home for cheap or make a profit through renting or reselling, you should target these types of homes. Unfortunately, it isn’t always easy. Most home sellers will not advertise upfront that they are selling their home to avoid foreclosure. First, you need to schedule a meeting. Ask to for a showing of the property. Start a conversation. Be friendly. In no time at all, you may have the full story behind the sale. It may be due to relocation, but it may also be due to foreclosure. If this is mentioned, ask out of curiosity for the mortgage lender’s name. Be discrete about it. “Who is your mortgage lender? They really aren’t willing to work with you?”

If you like the property in question, inquire more about the selling price. Is it inline with the home’s appraised value? It should be. In fact, it should be less. A homeowner who is selling their home to avoid foreclosure should be willing to take just about anything. Their main goal should be to pay off their mortgage. This mean you should get a good deal. If not, try bargaining first. If the outstanding mortgage is a relatively low or affordable figure, offer that as your asking price. As a good deed, offer to throw in an extra thousand or so for the cost of relocation or first and last months rent. If you are met with a refusal, you may just move on. But, you do have another option.

As previously stated, you want to get the name of the mortgage lender. Although a little deceitful, it can result in a low-cost home or property for you. What you do is approach the lender. Speak to a loan officer. State you tried to buy the home, but the sellers were asking too much. Emphasize your interest in the home, but state your unwillingness to pay an unfair value. See what the mortgage lender can do for you. In fact, suggest a short sale. Only do this if the borrow and current home seller outright stated that their home will be foreclosed on.

A foreclosure short sale is an agreement between the mortgage lender and the homeowner. They agree to sell the home for less than the outstanding mortgage on the home. Borrowers accept this to avoid foreclosure. The home sells and they don’t have a foreclosure listed on their credit report and bankruptcy is avoided. Mortgage lenders agree to short sales because they want their money, even if less than what is owed. It also saves them from long and costly foreclosure proceedings, where many borrowers and occupants become difficult and unruly.

If you approach a financial lender acquiring about a short sale, it will not happening right away. Remember, the borrower is still trying to sell their home independently. With the poor state of the real estate market, many homebuyers are unable to secure needed financing. This means that many homes sit on the real estate market for months. It may take a month or more or threats from a mortgage lender about foreclosure before the borrower agrees to a short sale. But, if you approached the mortgage lender and already made an offer, you should be the first person they contact!

Convincing a mortgage lender to agree to a short sale on a property you do not own is risky. You risk insulting the mortgage lender and the homeowner, but if you want to profit from soon-to-be foreclosed properties, you must take risks.

Which Short Sales Are the Best to Profit From?

Do you want to profit from the buying and reselling of foreclosure short sales? If so, you may find a long and bumpy road ahead. For most lenders, short sales are an ideal alterative to foreclosure. For others, they can’t seem to make up their mind. This may result in a purchase offer denials, months of going back and forth, and a deal falling through at the last minute. How do you prevent this from happening? Know which type of short sale properties are the best and easiest to profit from.

So, how do you know? There aren’t any guarantees. Each property, borrower, and lender is different. Borrowers who want to avoid any damaging impacts on their credit are likely to suggest and push for short sales. Lenders who know they will only lose money with foreclosure proceedings are likely to opt for them. A big deciding factor is also the property in question. Still, there are signs you can and should look for.

Homes with only one mortgage. When in financial distress, property owners often put their homes up as collateral. This results in a second mortgage. Usually, this means that two different lenders have rights to the home. In this aspect, two different lenders must approve a short sale. Unfortunately, one will be shorted what they are owed. This is the second lender.

As a short sale buyer, you must wait until both lenders agree to a short sale. Unfortunately, this is a very lengthy process. The second lender will drag their feet. No one wants to lose money, why would they? They are hoping for a higher purchase offer, a traditional sale, or that a foreclosure auction yields more money.

Homes with small lenders. In the United States, banks and lenders come in all different sizes. A lender has the final say with short sales. If a large lender is involved, you will get the go around. Yes, you are speaking to the loan supervisor in your local office, but they have someone higher up to answer to and so forth. You do not experience this problem with local lenders. Financial institutions with the deciding supervisor right onsite can have an answer for you in half the time!

When discussing the sale of a short sale property with a real estate agent, inquire about the lender. Don’t give up if it is a large lender, but make your move right away if that lender is locally owned and operated. Unfortunately, there is a double sword. Small financial institutions are not experiencing as many financial troubles as larger banks. They were wise in how they handed out money. Most opted to avoid the troublesome adjustable rate mortgages. Less of these borrowers are in financial distress.

Homes with borrowers who want a short sale. As previously stated, typically the borrower suggests a short sale. These individuals know the damage a foreclosure does financially. Mortgage lenders have the ability to forgive the debt or recuperate the difference though an unsecured loan. If the borrower must pay back the $10,000 difference, it is still better than unpaid $150,000 foreclosure. What does this mean for you? Help from an unlikely source.

Although short sales are an alternative to foreclosure, some lenders avoid them or take months to give a response. This is when a cooperative homeowner provides assistance. If they continue to apply pressure, along with yourself, and a real estate agent, a quicker response is likely.

In conclusion, most short sales are an amazing value. For example, if a borrower owes $50,000 on their mortgage, you may get a $100,000 home for only $45,000. Yes, the property would cost less at a foreclosure auction, but your chances of outbidding the competition are lower.

Buying Short Sale Properties

If you watch television or use the internet to catch up on the news, you should already know it is a buyers market. Many experts say the real estate market is in a poor state. Yes, this is true. That is unless you are a buyer with solid financial resources. If you are, you should examine short sale properties. They present a number of moneysaving and moneymaking opportunities.

What are short sale properties? They are properties that will soon be in foreclosure. The mortgage borrower cannot make their payments. Foreclosure is right around the corner. Homeowners want to avoid foreclosure at all costs. You may be surprised to hear that lenders feel the same. Foreclosure proceedings are stressful, lengthy, and costly. In some instances, a short sale is opted for. The home is sold before foreclosure. It is sold for less than the outstanding mortgage amount due. Typically, this means a good deal for the buyer.

Whether you want to use short sales to make money or save money, preparation is vial to your success. So, what do you need to be prepared for as a first-time short sale buyer?

To get the run around from mortgage lenders. A previously stated, lenders consider short sales a foreclosure alternative. It is their last attempt to avoid it. Unfortunately, short sales aren’t much better. Lenders can require delinquent borrower to pay the difference through unsecured, standalone loans, but many simply take the loss. No one wants to lose money, so you may have to wait and wait. During this time, the lender is hoping they receive more short sale purchase offers or that the delinquent borrowers come into money.

The possibility of losing money. As previously stated, short sales present good moneysaving and moneymaking possibilities for buyers. Typically. Unfortunately, many properties are financed with two or even three mortgages. There are also underwater homes, where the borrower owes more than the home is worth. Short sales mean a loss for lenders, but in these situations the loss is greater. Always have a property professionally inspected and appraised before the final closing. To make or save money, only pay less than fair market value.

Constant contact with the mortgage lender or selling real estate agent. As mentioned above, many lenders give short sale buyers the run around. In the event that happens, don’t sit back and wait. Instead, make contact with the representing real estate agent, lender, or both. If you find yourself waiting after two months, be firm in your stance. Demand an answer to your purchase offer in two weeks or state you will withdraw your offer.

More waiting. If your purchase offer is accepted, you may have to wait a few days or even a month to gain access to the property. One of the reasons why homeowners prefer short sales is because they stay in the property. As previously stated, short sales can take time. Some mortgage lenders give a response and start the sale process within a few days, but others wait months on end. Since there are no guarantees, current home occupants rarely know ahead of time when they need to be out. The mortgage lender processing the sale may give them a week or more.

Right about now, you may think that short sales are more trouble than they are worth. They are not, especially when compared to foreclosures. You deal directly with a professional real estate agent or lender, as opposed to bidding in a fast-paced auction. You get a property where the current occupants are prepared to leave; they don’t have to be forced from the home. Yes, buying short sales may be a long and bumpy road, but it is worth the ride for most.

Foreclosure Short Sale Information: Frequently Asked Questions

Are you a first-time real estate buyer? If so, now is the time to act. Most experts say the real estate market is in a poor state. Yes, this is true, but mostly for sellers. If you have the needed financial resources now is the time to buy. To improve your chances of making a profit or getting the best deal, look at short sales. They are increasing in popularity and present many opportunities for buyers.

If you are unfamiliar with the real estate market and short sales, you may be looking for more information. Please continue reading on for short sale information and the answers to commonly asked questions.

Question: What is a short sale?

Answer: A short sale is used to describe the process of selling a home for less than the outstanding mortgage. For example, if a borrower still owes $50,000 on their mortgage, the lender may be willing to sell the home for $40,000 or less.

Question: Is there a difference between short sales and foreclosures?

Answer: Yes. In many ways, they are similar. The borrowers and current homeowners must leave the home, but there is a huge difference in how it comes about. With foreclosures, home occupants are forced out of the home. With short sales, they were involved in the decision to sell, so they are already prepared to leave. Also, short sales are sold directly through the mortgage lender or a real estate agent. Foreclosed properties are typically sold through an auction.

Question: How does a short sale come about?

Answer: The process begins when the borrower realizes they can no longer afford their home. This may be due to job loss, a pay reduction, adjustable rate mortgage, or just poor financial choices. Typically, a borrower asks a mortgage lender about a short sale. They do so because one is less damaging to a credit report than a foreclosure. The mortgage lender reviews the borrower’s assets, income, and hardship letter. Unless the lender believes they can get more from the property in a foreclosure auction, most will opt for a short sale.

Question: What types of properties are sold via short sales?

Answer: All. Most short sale properties are single-family homes. Right now, these are the individuals most likely to fall behind in payments. The owners of multi-family homes and commercial buildings should have income coming in from tenants. That does not mean the property cannot enter into default, it is just less common.

Questions: Are shot sale properties a good deal?

Answer: Most of the time, yes. Short sales involve selling a home for less than the amount due on a mortgage loan. Lenders who agree to a short sale have already accepted the fact they will not get all of their money. Still, some is better than nothing and lengthy foreclosure proceedings. Since most have already accepted the fact, they are willing to take a loss and offer a great or decent price. The only instance in which a short sale may not be a good deal is with underwater homes. This is when the borrower owes more than the home is worth.

Question: How long does a short sale take?

Answer: It depends on the lender in question. With short sales, the borrower has no say. The lender makes all the decisions. Small banks, where the supervisors are onsite, can have an answer for you by the end of the day. Most often, it may take a month or more.

Question: Should I have payment for a short sale property upfront?

Answer: It is not required, but will be beneficial. If you need financing, acquire it upfront or get pre-approved. A mortgage lender is more likely to accept your purchase offer and quicker when you can pay right away.

Question: Can I bargain for a lower price?

Answer: It will not hurt. Mortgage lenders are already taking a loss with short sales. For that reason, they will be less likely to lower their selling price. If you have cash in your hand and are ready to pay, bargaining for a lower price may work.