Short sale or Foreclosure? That is the question.

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Short sale or Foreclosure That is the questionShort sale or Foreclosure? That is the question.

Many factors will influence the decision seller’s make of whether or not to try a short sale on their home, or just allow it to go into foreclosure. Each situation is unique for each individual. Seller’s must take into account the condition of the property, how much debt is still owed, and a time frame to meet all requirements in. (Someone suffering from illness or going through a divorce may need to unload their property more quickly). As an interested investor or buyer, you can help them make this decision by discussing the following lists with them.

Why Short Sale Is a Good Idea

  1. They won’t be required to pay rent or mortgage payments while living in the home during the short sale process. This allows time for them to stash a little money back and build the amount in their bank accounts.
  2. If the short sale is done in a timely matter, no payments will be missed on the home.
  3. The sellers could actually come out not owing anything at all. (The difference of what was owed on the home versus the selling price.)
  4. Short sales are on the rise and process has gotten easier.
  5. If their home debt is forgiven, they may not owe any taxes on the property.
  6. Automatic qualification for short sale is not out of the question.
  7. Moving money may be supplied to them for up to $30,000.
  8. The property will sale “as is”, requiring no effort on their part to fix or renovate before it’s sold.
  9. Short sales aren’t such a hard blow to a seller’s credit report.

Why Short Sale May Be a Bad Idea

  1. Major lenders may be picky and turn down what you consider to be a reasonable offer.
  2. It is not an easy process to undergo on your own when you don’t have proper representation to lead you.
  3. Without this representation that knows the ins and outs of short sale, the bank could ultimately try to obtain money from you later. You have to know which rights to waive.
  4. Foreclosure of the property could occur anyway. Such as, if a buyer has a change of heart and decides to retract his offer.

Be sure to mention that it’s always best to know the laws and legalities of your own specific area. For example, some states have statues that protect a homeowner in a foreclosure, but not in a short sale. You need to know the exact rules that pertain to your situation.

What you, the buyer, should tell the seller

  1. That you know this a short sale and are more than willing (and able) to pay cash for the property.
  2. You are well educated in the short sale process and would like to communicate with them on a regular basis. This promises that you want the sale to go smoothly. Let them know you are serious about buying this home.

What the seller and/or Listing agent should tell you

  1. What the valuation of the property is and when it was done.
  2. If the seller is willing to be cooperative with a short sale.
  3. If the title has been pulled.
  4. The names of the lenders on the home.
  5. The stage of the process they’ve reached with the lender.
  6. If they are behind on any homeowner’s association dues.

It’s to your benefit to find out as much information as you can. This allows you to decide if it’s better to pass over this property and go on to another one.

Reasons For You To Buy Short Sale

  1. Not everyone knows how the short sale process is conducted. This may lead to a home buying opportunity on homes that other people have passed by.
  2. It’s possible to purchase a short sale more than 15% below market price.
  3. You could have a large say so in the price that the home will sell for.
  4. You can keep involved with the property even without supplying Earnest Money.
  5. You can make offers on multiple listings without having to close on them all at the same time.

Reasons Not To Buy Short sales

  1. If you plan to rent or lease the home, you could have to hold the property for 1-4months, costing you a loss in profit.
  2. Emotionally charged sellers may damage the property before the final signing. You would then be responsible for paying for all repairs that resulted from them.
  3. Even after all your hard work and time, the property could still go into foreclosure in the end.

In conclusion, you can try to help make short sales a viable choice for motivated sellers. Yet, at the same time, you must go over the pros and cons of the specific short sale yourself to see if it’s the right one for you.