In the current real estate market, the number of foreclosures is expected to double from the previous year. While this is creating problems in credit markets and is causing financial problems, it also opens a window to get property at a lower price than you would pay elsewhere. Purchasing foreclosed homes and short sale properties is a great way to save money on your investments, all it takes is the willingness to do a little more work. Buying after a foreclosure does have some risk attached, so it isn’t guaranteed success, but the opportunity is often worth the risk
So, how do you purchase a foreclosed home or a short sale? You should start by locating an area where you are interested in purchasing a property. From here, you have to look for foreclosing properties, so let local real estate agents know you are looking for foreclosures, they will do a lot of the foot work for you. You should also contact lending institutions to see if they have any properties going into foreclosure.
Once you start getting the information on foreclosures, you can investigate the properties. This can help you determine the market value, so you know how much you have to put into it to sell for a profit. You’ll also want to investigate who owns the property and whether there are any liens on it. From here you can start negotiating with the lender about purchasing the property and how you will finance it. You may even be able to assume the previous loan. This process can be complicated, so be prepared to do a lot of footwork before you actually purchase the home.
Short selling is a similar process, but it actually occurs before a property enters foreclosure. Short sales allow a property to be sold at a lower price than the remaining mortgage, but they are difficult to arrange. The seller must already be in default on their loan for the bank to consider this option. This means their property is likely worth less than the remaining balance on the loan. Unfortunately this poses a problem, because the bank is going to expect the market value of the home out of the purchase. You want to research the home’s value, potential problems, and especially determine if there are 2 mortgages. A second mortgage usually means a short sale is impossible because it would result in the second lender being wiped out.
A short sale involves negotiating with 2 parties, a home owner and a bank, and because of this it will take a longer time to close than a regular sale. That being said, it is also a home that has not yet been moved out of, so you are better off than when purchasing a foreclosure. In the end you only want to make a purchase that is a good deal, so don’t get into a sale that isn’t worth it.