Saturday, February 21, 2009

Pros and Cons of Purchasing a Short Sale Pre-Foreclosure Property

If you are searching for discounted properties, you are probably coming across
short sales, REO’s (bank owned) and Fannie Mae properties. Short sales are unique because they are pre-foreclosure properties as opposed to REO and Fannie Mae properties which are already owned by the bank or Fannie Mae and have gone through the foreclosure process.

Pros of Purchasing a Short Sale

Purchasing short sale properties can be beneficial because they are discounted. To what degree the discount ends up depends on the location, market place and the lender, who ultimately decides if they will approve the sale. If your offer is accepted, then you will probably be getting a property at a very discounted price.

Before you make an offer on a short sell property, it is recommended that you check the prices of similar properties in the building, if you are buying a condo, or in the subdivision or area that you are interested in purchasing. If there are no comparables, then see what else is listed in the area or under contract so you can get an idea of how much you should be paying for the property.

A Realtor will be able to give you a CMA (comparative market analysis) free of charge or you can go online and check yourself. However, you may not find as many properties as the Realtor, but it will give you an idea of what properties in the area are selling for. Right now, it’s a good idea to go back and check the last three to six months for sales because the prices having been going down in many areas so you don’t want to research too far back.

Cons of Purchasing a Short Sale

· Uncertainty of whether the lender will approve the offer.
· Time delays. A short sale can take anywhere from thirty days to six months to get approved by the lender or lenders. In some cases, there are second mortgages, so you need two lenders to approve the transaction.
· Competition of other offers. Until the lender accepts an offer, other bidders may submit offers as well.
· No reimbursement for costs of inspection or loan applications fees. If your offer is accepted, you must still meet the contingency dates for inspections and loan contingencies, and any costs you incur will not be reimbursed to you if your offer is not accepted by the lender.

So now that you are educated on short sale transactions, you can make an intelligent decision as to whether the property is worth your time, effort and money.

Short Sale Properties can be found on Foreclosure Home Investors for FREE.

6 comments:

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Patrick said...

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Patrick said...

This sounds really interesting. I haven’t heard about anything like this previously. I have huge interest in real estate. Thanks

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