Foreclosures and Short Sales
Date Posted:
Thursday, November 20 2008 12:17 PM
Today's real estate market seems to be comprised of the two buzz words foreclosure and short sale. In fact most markets are seeing 30% or more of their transactions being lender mediated through foreclosures or short sales. The increase in market share of these types of properties continues to put downward pressure on prices. Albeit, it is a great time to buy and bargain hunters continue to move in to take advantage of the high inventory, bargain prices, and low interest rates.
Buying a Foreclosure
In dealing with a foreclosure the banks selling them are mainly concerned with price. You as the buyer need to determine what the right price is for you regardless of their asking price. This is where an experienced real estate agent can greatly improve your chances of not only getting the home, but also getting a better price and making it a smooth transaction. Your real estate professional should talk to the listing agent and try to find out how many offers if any the home has had and are there any current offers. Your agent should also be able to gather some info from the MLS such as how long has the home been on the market, when was their last price reduction and how much, any city required repairs, sale price of comparable style homes in the area over the last six months, what are the comparable homes listed at on the open market and what is the value of the property “as-is” and then if you as the buyer was to fix it up/ rehab the property after closing. The answers to these questions can educate you about the market and also give you an informed decision on what price you should offer.
While multiple offers are common to see on foreclosures there are a few strategies that can strengthen your offer. With the credit market tightening, a cash offer can beat out an offer that is contingent on getting financing. In fact, it’s common to see banks accept cash offers that are thousands of dollars less than an offer that is higher but is contingent on obtaining financing. Other helpful tips include: offer to close in 30 days or less, remove the inspection contingency, if you are financing do not ask for any seller paid closing costs and do not ask the bank to perform any repairs.
Buying a Short Sale
A short sale is where the lender allows a property to be sold for less than the amount owed on a mortgage and the lender agrees to take a loss. Therefore, all short sales are subject to seller and bank/lender approval.
While a short sale home is usually in much better condition than the foreclosure there are some big pitfalls. Short sales can be very frustrating for all involved. It’s not uncommon to wait 90 days or more before getting a response from a bank on accepting or declining an offer. Also, many of the homes on the MLS labeled as a short sale are not truly sellable. Just because a property is listed as a short sale it doesn’t necessarily mean the lender will accept your offer, even if the home owner accepted it. So before you write an offer on a short sale, do your best to know what you are in for prior to writing the offer. Your real estate agent should be able to find out where in the process the listing agent is with the short sale approval. The key really is to verify it is a pre-negotiated short sale. Meaning the seller has met the qualifications of a short sale and all necessary documentation has been provided to the bank. Your agent will also want to ask if there have been any offers or are there currently any offers submitted to the bank and what the results of those offers have been.
Click here to see some of the current foreclosure and short sale listings on the market. - if you don't see what your looking for here please feel free to contact me and I can set up a property search to match your specific criteria.
Comments
Posted by Minneapolis Real EstateNov 21, 2008 10:18 AM CST
It is amazing how many REOs there are here in the Twin Cities real estate market!