Forclosures and Short Sales

In this present market, a buyer should know a little about purchasing a bank foreclosure or a short sale.  There are many listings out in the market place now that are foreclosures or pre foreclosures.  You may also hear the term "short sale".  I will try and explain a little about each of these terms and what that means to you. 

Foreclosure

When a home is in foreclosure, the bank or mortgage lender has already taken possession of the house.  They have listed the home with a Realtor usually at market value.  Most lenders do take into consideration the condition of the home.  Some lenders will repair the home and want to sell at market value or some will not do the repairs and will list lower than market value to give the buyer room to do the repairs themselves.  In purchasing a foreclosure, you may have to sign additional addendums from the selling lender and follow some additional guidelines.  These transactions could take longer than a traditional closing, but this is not the norm. 

Pre Foreclosure

A pre foreclosure, the seller is behind on his payments and the bank or mortgage company is about to foreclose.  In this stage, the seller usually needs a quick sale to save them from facing a foreclosure. 

Short Sale

A short sale is when the seller is behind in payments, facing foreclosure, and the market value of the home is no longer what it was when they purchased it.  Most of us have heard the term "upside down" when talking about cars, well a short sale is basically the same situation on a home.  The seller must negotiate with the lender to settle on an amount lower than what is owed to them.  This can be a long and stressful process.  If you are a seller in this situation, you should be sure to hire a Realtor who is knowledgeable about short sales and can get the process approved for you as quickly as possible.  If you are a buyer considering purchasing one of these listing, you must be patient with the process and not be in a hurry to close the transaction.  Sometimes these transactions take much longer than the normal 30 to 45 days.  The price you pay on a short sale is up to the lender and how much they are willing to loose.  These can be very good purchases, but take someone who has a lot of patience and a Realtor who understands the process. 

                  Daphne Lacey is an agent with an Austin real estate Broker and is licensed to do business in the state of Texas by the Texas Real Estate Commmission. License number is 0496396.

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