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

Is it better to buy a short sale or foreclosure?

A short sale is still owned by the homeowner, who owes more on the mortgage than the home is worth.

“The short sale is, in my opinion, far better than buying a foreclosure because the home is generally in better condition because it’s been occupied,” she says.

Short sales often take a notoriously long time to close..

Why do a short sale instead of 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.

Why is a short sale bad?

Short sales present another risk because the lengthy short sale process could cause you to miss out on other potential purchases. With all your time and resources tied up in short sale negotiations for months, you could miss out on an even better investment opportunity.

What are the disadvantages of buying a foreclosed home?

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.

Can I negotiate a short sale price?

It is entirely possible to negotiate a short sale, but doing so can be a time-consuming process. Instead of negotiating with the seller alone, as is the case with most traditional sales, short sale negotiations must be approved by the lender, too.

Do you owe money after a short sale?

After the short sale is completed, your lender might call you or send letters stating that you still owe money. These letters could come from an attorney’s office or a collection agency, and will demand that you pay off the deficiency. Your lender or the collector might even try to intimidate you into making payments.

Can you buy a foreclosure with cash?

Foreclosed properties can only be purchased with cash. On average, approximately 60% of our foreclosed homes purchased are financed. You can finance many REO properties through Wells Fargo or a lender of your choice. … Financing may provide tax benefits, including the potential to deduct your interest payments.

Are short sales worth it?

Homes Sell at Market Value Lenders aren’t naive or unaware of the value of a home. … Lenders typically only accept short sales when the home is worth the short-sale price, which means market value.

What are the pros and cons of buying a foreclosed house?

To help you make a smart decision, here are some pros and cons for buying a foreclosed home in today’s market.PRO: They are still cheaper. … CON: Foreclosed homes can be very risky. … CON: Many foreclosed homes are not in prime locations. … CON: Banks aren’t people.

Are foreclosures worth buying?

Foreclosed homes are real estate properties whose owners failed to make the mortgage payments. So, the bank took over the property and tries to sell it to get back the investment it made. Buying foreclosed homes can be a good real estate investment strategy. However, these investment properties are not for everyone.

What makes buying a foreclosed property risky framework?

One of the risks of foreclosure investing is buying a property that needs more repairs than you initially expected. In fact, foreclosed homes are typically sold «as is», meaning that the bank or the owner won’t make any repairs before putting the property up for sale.

Do Banks prefer short sales or foreclosure?

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 does it take to close on a short sale?

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.

Who pays the closing costs on a short sale?

One other drawback in a short sale for the buyer is that you will likely have to pay the full buyer closing costs. With a more traditional home purchase, you can often negotiate with the seller to have them cover some closing costs. But in a short sale, buyers are rarely afforded this concession.

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.

How long does a house stay in short sale before foreclosure?

120 daysA short sale may take up to 120 days, but this could be shorter or longer depending upon your specific situation. If you are unable to sell your home, you may be able to transfer the ownership of your property to the owner of your mortgage. This option is called a Mortgage Release or Deed-in-Lieu of Foreclosure).

How much should I offer on a short sale home?

To get the bank’s attention, investors should consider putting down between one and three percent of the sales prices. This will speak volumes as a serious buyer. In addition, real estate investors should put their earnest money deposit into a trust account once the short sale has been approved.

Do banks want you to foreclose?

Foreclosure is not the bank’s first choice, they don’t want your home, and there are actually reasons that they want to help you keep it. … A loan in default not only isn’t paying any income to the bank, it also requires them to spend money.