Short Sale & Foreclosed Homes
Buying a short sale/foreclosed home
During your home search, you may come across a home that's up for short sale or is foreclosed. Prices of these homes may be lower than others for sale nearby, and that may pique your interest.
When a home is up for short sale, the seller is working with a lender. This could be because the seller is facing a hardship or owes more on the mortgage than the home is worth. With foreclosure, the lender owns the home and no one is living in it.
Pursuing short sales
Consider these pros and cons when pursuing a short sale.
What is a short sale/foreclosed home?
- Short Sale: A short sale is a home that's priced less than the amount the current owner owes to the lender. Short sales are beneficial because the lender hasn't repossessed the home and the seller doesn't have to deal with the consequences of foreclosure.
- Foreclosure: A foreclosure is when a buyer defaults on a mortgage and causes the lender/bank to repossess the home. Homes that have been foreclosed are put back on the market to help the lender get their money back and are often priced lower than it might be worth.
How buying a short sale/foreclosed home differs
Buying a home in short sale or foreclosure is similar to buying a traditional home, but there are differences:
- Sales can take months to complete. Foreclosures tend to be a little faster than short sales, but in both cases, the lender has to approve the sale. Short sales can get complicated and lengthy if there is more than one mortgage on the property.
- Your real estate agent will send the offer to the lender for approval instead of the seller’s agent. The lender could also make a counteroffer.
- You’re buying the property ‘as-is.’ You’ll have to pay for any needed repairs. And you can’t negotiate for a lower price based on the repairs.
Once an agreement is in place, the standard sale and closing process will occur.
If you want to buy a short sale or foreclosed home, make sure you have money to cover all closing costs and for any immediate repairs. You should also look at being prequalified or conditionally approved for a mortgage so you’ll be ready to proceed with your loan when the sale is getting close. Talk with your real estate agent if you’re interested in purchasing a short sale or foreclosed home.