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Foreclosures & Short Sales
Foreclosures are properties that have been legally repossessed by a bank or Fannie Mae. The owner is no longer a person but a corporation. They have the same rights to sell the property as any owner. Foreclosed properties come in a variety of "flavors". When a person loses a home to foreclosure the property may or may not be in salable condition. When it requires significant repairs the bank will often simply put it up for auction, with or without a reserve. If you were to purchase a property at auction you truly get it "as-is". There are no contingencies that allow you the opportunity to cancel the sale.
The owning bank may choose to do some or significant repairs to the home, depending on the condition and the marketability of the home within its surrounding location. And, as is the case with purchasing a home in a conventional transaction, you usually have contingencies for inspections, appraisals, etc. That means that after you and the bank have negotiated a price you can hire an inspector to see if the home is really worth what you offered, or if there are deficiencies that may cause you to cancel the contract.
In some circumstances, especially when the home is owned by Fannie Mae, the seller prefers to sell to an owner/occupant, rather than an investor whose intention is to flip the house or to rent it out. And in some cases the bank will hold offers in abeyance until a certain period of time to try to generate more interest and offers. When multiple parties are interested in a property the bank will often ask for your "highest and best offer". While the offering price is usually the driving factor, the amount of the down payment or type of financing may also be a consideration.
Short Sales - When a homeowner owes more on the mortgage than it is currently worth in the real estate market they may apply for a short sale. This process occurs when a lender agrees to write off the portion of a mortgage that's higher than the value of a home. A short sale can keep the homeowner from landing in bankruptcy or foreclosure. It is not an easy procedure to approve, and more paperwork than an original mortgage application.
Typically the lender(s) will require 90 days or more for short sale approval after the seller has agreed to your contract price. But remember, the lenders have the final say. They can accept your offer, they can reject your offer, or they may even do a re-appraisal and ask you to pay more for the property than you originally agreed to with the seller. If you have a deadline for moving into a new home, you may want to avoid short sale properties. |
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