I’ve been showing quite a few properties here in SW Orlando lately, and many of them have been short sales and foreclosures. I think few consumers really don’t have a firm grasp on what differentiates a short sale from a foreclosure, so I figured it would be a good topic for today.
First of all, prices on short sale properties don’t mean anything unless the price has been approved in advance by the bank. A short sale means the seller owes more money to the bank then what they can sell for in the current market, so the seller is essentially asking the bank to take less than what is owed.
Say for instance you owe $100,000 on your mortgage and the current value of your home is $80,000. In a short sale situation, you’re essentially asking the bank if $80,000 is close enough. Banks will agree sometimes because it’s better than the alternative, foreclosure.
Unfortunately, banks will not give any indication of which price they will take until the seller gets an offer. The bank then orders a Broker’s Price Opinion and an appraisal to determine which amount they will take. I just can’t figure out why the banks don’t do this ahead of time. Anyway, this process usually takes about 2 months and from my experience, banks often come back with an offer that’s higher than the original listing price.
If you need a home in less than 90 days, it’s tough to buy a short sale property unless the asking price has been approved already. Always ask the agent if the price has been approved or not and you’ll have a pretty good idea on when you’ll get an answer.
Properties that have already been foreclosed on are often a much better deal than short sale properties at least from what I’m seeing out there. While the bank often counters higher than the asking price on short sales, banks are usually willing to negotiate a fair amount on foreclosures.
While you can find a good deal either way, foreclosures are far less taxing emotionally. The bank responds surprisingly quickly to offers and will consider anything within reason.
My advice is to stick with the foreclosures if you’re looking for a deal. Oh by the way, if you see a home that’s being foreclosed on, it’s nearly impossible to get in on the property until the foreclosure process is complete so you gotta wait.
One great place to search for foreclosures is http://bidselect.com/. It’s really easy to use, it’s free, and some great deal can be found here.
I’ve also added a foreclosure search tool on the far right column of this blog. Hope you guys enjoy it.