Quick Answer: Is It Better To Buy Short Sale Or Foreclosure?

What is the cheapest way to buy a foreclosed home?

Buy Directly From the Bank The best way to eliminate most of the competing buyers for a cheap foreclosure is to contact the bank directly.

Banks are often willing to give a break on the price if a buyer or investor buys more than one home in a bulk-purchase package..

How long does it take for a short sale to close?

Once an offer is received and signed, I send it to the bank, along with the seller’s short sale package and a prepared HUD. From that point to the time of short sale approval, the average timeline is about 60 to 90 days. It means 30 days to sell + 60 days for approval + 30 days to close escrow = 4 months, on average.

Why are foreclosures cash only?

When a property is listed as “cash only” it means that it doesn’t qualify for a loan, for one or several reasons. Properties must pass an inspection done by an appraiser hired by a mortgage lender, and if problems are evident and the home fails inspection no lender will use the property as collateral for a loan.

Why do banks prefer foreclosure to short sale?

Banks are run like a business because they are a business looking to earn a profit. If it costs more to foreclose over agreeing to a short sale, the bank is very likely to favor the short sale. With foreclosure, a bank takes possession of the house, then resells it at a mortgage auction to the highest bidder.

How long can a house stay in short sale?

If you’re buying a house through a short sale, you can’t sell it for another 90 days.

How much should I offer on a short sale home?

While many first-time homebuyers simply put down a minimum deposit, usually around $1,000, investors looking to capitalize on short sales should consider going higher. To get the bank’s attention, investors should consider putting down between one and three percent of the sales prices.

Who pays liens in a short sale?

During the short sale process, you must get all creditors to release their liens. They may do this if you agree to pay them in full or make other payment arrangements. Some lien holders, such as the IRS, may agree to take a full loss and release the lien for zero repayment as a result of your financial hardship.

Why would a bank accept a short sale?

Why Banks Approve Short Sales Banks are in the business of making money. Banks can sometimes make more money from a foreclosure than a short sale. But more often than not, banks want to minimize losses, and will consider a short sale under the following conditions: Seller provides a documented hardship.

Is it a good idea to buy a short sale house?

Buying a short sale can be a great opportunity to get a property at a reduced price, but it can also have its disadvantages. Purchasing a short sale is a more complicated process than a typical home sale, so there are some unique risks involved when investing in this type of investment property.

Is there a downside to buying a foreclosure?

Buying a foreclosed home is riskier than buying a home that’s owner-occupied. Some of the drawbacks to buying a foreclosed property include: Increased maintenance concerns: Homeowners have no incentive to maintain the home’s condition when they know they’re going to lose their property to foreclosure.

Why short sales are bad for buyers?

Higher Buyer Closing Costs Lenders will rarely pay for “extras” in short-sale transactions like a seller would be willing to do. … Sometimes lenders will even refuse to pay for standard seller closing costs, such as transfer taxes. And you’ll probably have pay for them out-of-pocket if you want any specific inspections.

What are the pros and cons of buying a short sale home?

The Pros and Cons of Buying a Short SaleShort sales can take a long time. … They are sold as-is. … Make sure the lower price is really worth it. … The good deal factor can be influenced by the market conditions. … Less competition. … Don’t overlook needed repairs. … Home inspections are a must. … Research the community, get neighbors’ opinions if possible.

Can you inspect a foreclosed home before buying?

You Absolutely Need a Home Inspection. Never buy a foreclosed home owned by a bank without first hiring a home inspector to come tour it. Unlike with a foreclosed home bought at auction, you do have the right to a home inspection before closing your sale. … A home inspector can find these trouble spots.

How long does short sale stay on credit report?

seven yearsBecause short sales and foreclosures both fall under this umbrella category, most lenders won’t distinguish between the two, and both stay on your credit reports for seven years. Here’s how a short sale works: When you sell your house, all proceeds usually go to the lender.

Why would a bank deny a short sale?

A short sale is sometimes denied due to something as simple as the seller being current on paying their mortgage. The bank’s guidelines might state the bank isn’t allowed to approve a short sale if the mortgage payments aren’t in arrears.

Does a short sale count as a foreclosure?

Foreclosures are involuntary, where the lender takes legal action to take control of and sell the property. Homeowners who use short sales are responsible for any deficiencies payable to the lender. Short sales allow people to repurchase another home, while foreclosures affect a borrower’s credit score.

Are short sales cash only?

No cash-out A short sale means they won’t earn any profit from the sale of the house – the bank or mortgage lender gets all the sales proceeds.

Who benefits from a short sale?

For the seller, a short sale presents less damage to his credit report than a foreclosure, and allows him to recover and buy a new house more quickly. This sense of cooperation between the seller and buyer may facilitate the exchange and get the new owner into the house more quickly.