Is a Foreclosure or Short Sale Right for You?	Foreclosures   and Short Sales

Information for Buyers on Short Sales and Foreclosures

Short sales (the seller has a hardship and the bank has agreed to allow the property to be sold for less than what is owed to them) and foreclosures (the property is already bank-owned) may provide the opportunity for some attractive prices, but there are differences from a conventional purchase for which you should be prepared. 

Foreclosures

Ø  A pre-qualification or pre-approval letter must be submitted with the offer.

Ø  A purchase addendum from the bank will be required along with the offer. 

Ø  The earnest money check will be made out to the listing agent or the seller’s attorney.  In some cases, a certified check will be required.

Ø  Time frames are strict and limited.  If, for example, a home inspection is scheduled to be done within ten days, it must be done during that timeframe.  There will be a penalty for going beyond the closing date.

Ø  Contingencies other than financing will most likely not be permitted.

Ø  The opportunity for price negotiation may be limited.  The seller has had multiple valuations done and is well aware of the property value. Your real estate broker will carefully study the market, provide comparables, and assist you in getting the best possible buy.

Ø  Multiple offers are not unusual.

Ø  Some properties, due to condition, will not qualify for FHA or VA loans.  Assume that the seller will not bring the property to the standard required of a particular type of loan.

Ø  The time from submission of the offer to acceptance or denial may be longer than in the conventional buying process. 

Ø  In most cases furniture will not convey.  A bill of sale will not be accepted.  A buyer of a rental home should be prepared to furnish it.

Ø  A buyer should use an attorney who is familiar with this type of closing and should seek his or her advice early in the process.

Short Sales

Ø  Short sale transactions could take as long as several months to get approved and to close.  If you have to move in a specified period of time, a short sale may not be for you.

Ø  The presence of a second lien holder will complicate the process and diminish the possibility of getting a short sale approved by the lender.

Ø  Additional addenda will be required by the lender. 

Ø  If the seller has not been in touch with the lender and has not completed a short sale package, the time frame for approval of an offer may be extended.

Ø  Delaying the home inspection and appraisal until after the bank has issued a written letter of commitment   may save you money.

Ø  A buyer should use an attorney who is familiar with this type of closing and should seek his or her advice early in the process.