If you're in the shop for a new home, you've probably heard these buzzwords: short sale & foreclosure, but you may not know what they mean. Here are the basic definitions of these two terms:
Foreclosure (or Repossession) - Foreclosure is the legal process by which the mortgaged properties may be sold to pay off a mortgage loan that is in default. A foreclosed home is a property that the mortgage lender has taken into possession. These homes are typically winterized (plumbing drained, water turned off) to sell out damage to the home.
Short Sale Vs Foreclosure: What You Need to Know
Short Sale - Are pre-foreclosure homes. The mortgage lender has agreed to accept less than the outstanding mortgage balance to avoid foreclosure proceedings. The lender may forgive the disagreement or the existing homeowner may have to make arrangements to resolve the remaining amount.
Now that you know the basic definitions, you can begin to understand how these types of homes can offer big opportunities (and have the potential to cause headaches) for potential home buyers. If you're open to inspecting these types of homes on your hunt - remember these tips:
* Be sick person - As with any proceeding where there are many parties and legal entities involved, it's prominent to remember that these types of purchases can take time. If you're only finding at foreclosures and short sales, it may take you a long time to find a home in the condition that you want. Once you find your dream home and submit your offer, it can take weeks or sometimes even months before you hear back from the bank. While foreclosures commonly close faster than short sales, sometimes foreclosed homes are in worse shape. But the benefit of the home that is in better shape is sometimes outweighed by the lengthy process. With short sale, numerous parties are complex so gaining all the significant approvals takes longer. Knowing this before you head into the process may make being sick person easier.
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