I'm shopping for a home and would like to find a real bargain. There are a lot of foreclosure sales, short sales on the market here, but buying them seems very complicated. Is there a secret?
Here are some fast facts about short sales to get you started.
- "Short sale" is not code for "screaming deal." It just means the property is worth less than the value of the liens against it. You still need to do your homework to learn the home's real value before making an offer.
- Lenders are not going to approve a short sale unless they feel it's the best price they'll be able to get. So forget about stealing a home for pennies on the dollar--no matter what you hear on those late-night infomercials.
- Lenders won't approve short sales if the sellers are walking away but could afford to pay the mortgage. Make sure all the hardship documentation has been filed and approved before getting into escrow.
- Many bargain homes are sold "as-is" and need a lot of work. Mortgage lenders won't finance your purchase if there are health and safety issues or problems that could affect the property's marketability.
- Lender policies dictate the percentage of the home's value they'll accept. It's not really negotiable, so get an experienced short sale agent who knows what that magic number is.
- Nine of ten short sales fail and tempers run high. So load up on Tums and Exedrin ahead of time.
There are better strategies to buy property for less, and they won't feel quite so much like you're bucking rush hour traffic to get to a root canal appointment! Consider buying bank-owned property. It's much more efficient. The bank selling the property will probably want you to pre-qualify for your mortgage and get a quote from then, but then you are free to use whatever mortgage lenders offer the best mortgage rates.
Finally, there are HUD homes, which are FHA foreclosure properties. You can find them on HUD's website, and they sometimes come with special deals on FHA home loans. Fannie Mae and Freddie Mac also offer special deals on their foreclosure properties.