Buying Short-Sale and Foreclosure Homes For Real Estate Investors
This blog will discuss and cover buying short-sale and foreclosure homes for real estate investors. Buying Short-Sale And Foreclosure Homes For Real Estate Investors is not always a bargain as many think. Banks and lenders selling short-sale and foreclosure homes are not dumb like many homebuyers think. They want the best prices for the properties they hold in inventory. In this article, we will cover the following topics:
- What are Short Sale Homes
- The hurdles of buying short-sale homes and foreclosure homes.
- Pros and cons of buying short-sale and foreclosure homes.
- The Delays of Buying Short Sale and Foreclosure Homes.
Buying short-sale and foreclosure homes for real estate investors is very different than buying homes by sellers. Purchasing short-sale homes are more complicated than traditional home purchase transactions.
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The Disadvantages of Buying Short-Sale and Foreclosure Homes
When buying short-sale and short-sale homes, buyers are dealing with lenders. Homeowners have very little power. A home seller may entertain a real estate purchase offer when buying short-sale homes. The ultimate decision is the lender that holds the mortgage on the subject property. The mortgage process is different when buying short-sale homes. This includes negotiations to get an accepted offer for the mortgage process. Purchasing short-sale homes are just much more difficult to deal with.
What Is a Short-Sale Home
Many buyers think they are getting major deals when buying short-sale homes. This is not the case. A short-sale home is when a homeowner has a mortgage balance higher than the market value of their home. Homeowners with underwater mortgages cannot sell their homes unless willing to cover the shortage. The homeowner can no longer afford their mortgage payments due to extenuating circumstances such as a loss of employment, death, medical reasons, or other reasons.
Lenders Do Not Want To Own Real Estate: Will Offer Short-Sale For Financially Stressed Homeowners
The lender often will offer homeowners who can no longer afford their mortgage payments a short sale. This means that the lender will let the homeowner sell their home at a price lower than what they owe on their mortgage balance. Many lenders will offer homeowners short sales versus going through the foreclosure process. In return for a short sale, lenders will not go after the homeowner for the loss.
Is Buying Short-Sale Homes A Bargain?
Many home buyers think that purchasing short-sale homes is a major bargain. This is not the case. Lenders normally price the short-sale home according to what the housing market holds. Lenders generally price short-sale homes 5% to 25% below the market for a faster sale. Many homeowners who purchased homes before the 2008 Great Recession often purchased homes at an inflated price. Now those needing to sell their homes must sell them at a price under their mortgage balance. Buying short-sale homes do come with much more headache and stress for buyers. Be prepared for a long stressful home-buying process when buying short-sale homes.
Reason Why Buying Short-Sale and Foreclosure Homes Is More Stressful And Time-Consuming
Buying short-sale homes differs from buying foreclosed homes because lenders do not fully possess the property. Therefore, the homeowner needs to quarterback the sale of the home. The homeowner sets the price and needs to get lender approval. Lenders always lose money on short sales. Lenders must approve the short sale terms and have the final say.
Getting A Short-Sale Approved By Mortgage Lender
It takes time for homeowners to get approved for them to do short-sale. Homeowners need to apply and qualify. They must complete a formal application, and their lender will need financial docs. Once approved, sellers can choose their real estate agent of choice. A solid offer by a buyer will need final approval by the lender. Lenders often sit on a purchase offer for many days or weeks before approving it. Buying-short sale homes take much longer to close than traditional home sales.
Negatives Of Buying Short-Sale and Foreclosure Homes
Buying short-sale homes is not recommended for homebuyers who need to close on a home quickly. Buying short-sale homes takes substantially longer. It can take anywhere between two to six months or home to close a short-sale home. There are often many hang-ups with banks. There are many instances where home buyers get fed up and cancel the transaction.
Seller Concession When Buying Short-Sale and Foreclosure Homes
Getting seller’s concessions when buying short-sale homes is next to impossible. This means home buyers must come up with closing costs unless they can get a lender credit. Fees and costs may be higher when buying short sales. Some buyers are often required to pay delinquent taxes or homeowners association fees.
Difference Between Buying a Short Sale and Foreclosures Homes
Buying foreclosed homes is much easier than buying short-sale homes. However, short-sale homes are in much better condition than foreclosed homes. The seller normally still lives in the home and is maintaining the home in short-sale homes. Many homeowners want their homes sold via short-sale so they do not have a foreclosure on their record. Due to this reason, short-sale homes are properly maintained and are often in good condition.
Buying a Foreclosed Home
Foreclosures are homes where the lender has gone through the foreclosure process. Many homeowners were often evicted and thrown out by the county sheriff. There are cases where homeowners stripped the whole interior of a foreclosed home. Make sure that you get a full home inspection when buying a foreclosure. Some evicted homeowners poured cement in the toilets and stripped copper pipes.
Can Foreclosured Homes Be Financed?
For foreclosed homes that cannot be financed due to not being habitable, homebuyers can purchase foreclosed homes with FHA 203k Renovation Loans. FHA 203k Loans allow home buyers to purchase fixer-uppers with 3.5% after renovation value. Gustan Cho Associates offers FHA 203k Loans with no lender overlays with credit scores as low as 580 FICO. To qualify for a mortgage with a direct lender with no overlays on government or conventional loans, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We also offer non–QM loans and bank statement loans for self-employed borrowers. Gustan Cho Associates is available evenings, weekends, and holidays seven days a week.
