Understanding The Basic Concepts Of A Short Sale

Having a home to call your own is the pinnacle of the American Dream. From our earliest memories we plot, plan, and devise ways to find the ideal place to put down roots. Sadly though, once you’ve signed your name on the dotted line the idea of living happily ever after is not always the end of the story. With the tumultuous rise and fall of the economy many homeowners have found themselves over their heads in debt and have been forced into a position where they may have to consider selling their property.

Still, with the difficult trend of real estate in recent years many have found themselves unable to sell at a price where they can make a profit or even break even. This is the time when they may seriously need to consider doing a short sale.

What is a Short Sale?

A short sale is a transaction where a property is sold for less than the balance remaining on an existing mortgage. The term ‘short sale’ can also apply to the sale of property where there is more than one mortgage due. It could cover all the debt that is owed on a first mortgage but not the second or third. In short, it is a sale that will not completely cover all the debt or expenses that may be involved with any piece of whatever property you own.

What is Required?

It is important to understand that not all properties will qualify for a short sale. This type of transaction requires an agreement between both the seller and the mortgage holder before it can be accepted. From the perspective of the lending institution, they must be able to see that the sale will be in their best interests. For example, if the bank is looking at the possibility of a foreclosure they will be forced to pay a considerable amount in fees that they may not be able to recoup. Having a short sale instead may allow them to retain some of those expenses making it a much more profitable deal in the end.

Why a Short Sale?

While short sales have proven to be very beneficial for property owners they are not always the best choice for everyone. Many people who choose to do a short sale have not been able to build up any equity in their home. For that reason they usually end up owing much more money than the home is actually worth. These are the ones who could benefit the most from a short sale.

Many have the mistaken idea that if their home has dropped in property value that they qualify for a short sale however this is not always the case. Those who have equity built up in their homes of any kind cannot qualify. These types of transactions can only apply to those where after the sale is completed, the costs of commissions, title fees, recording fees, and any other additional expenses are not fully covered there is a balance remaining. This could happen in a number of different ways.

Other people choose this type of transaction just for the benefit of peace of mind. Often once the sale is completed, the mortgage holder forgives the remaining debt. If because of a loss of employment or other circumstances that may have imposed a financial burden makes it impossible to meet the payment obligations, a short sale gives you the opportunity to get out from under the stress that these bills may create.

You could also avoid a nasty foreclosure showing up on your credit report. This means that once you have been able to recover financially that your credit will not have to suffer the many problems and challenges that come from poor credit.

What Types of Properties Qualify for a Short Sale

It is also important to consider the types of properties that can qualify for a short sale. There are in fact, a number of separate qualities that a property must have before it can be considered for a short sale. Each of these are based on the hardship created if the property were not to be sold.

The most common qualification is when a home is considered to be underwater. An underwater home is when the purchase loan on the property is at a higher balance than its actual market value. This type of situation requires that the homeowner take a loss out of his or her own pocket. Under these financial circumstances the homeowner would be unable to refinance the property and if unable to cover the mortgage payments will be forced into foreclosure.

Short sales are also possible for homeowners who are experiencing severe financial hardships of some kind or another. Homeowner hardships usually apply to those who have lost their jobs or other sources of income and are suddenly unable to make payments or those who may have been subjected to a prolonged illness or disability that has kept them from building up an income sufficient enough to cover their monthly expenses.

Whatever type of hardship you’re experiencing checking with a willing short sale bank may be the perfect way to provide relief from the burden of high mortgage costs that you’re dealing with.

How to Know You Need to do a Short Sale

The idea of doing a short sale is probably obvious for those who are facing foreclosure but it may be wise for a homeowner to take action well before that happens. The mere fact that short sales can protect your credit rating may be enough to give serious consideration to your decision. However, there are also other factors that you need to weigh as well.

It would be well worth your while to talk to real estate experts, legal professionals, and your financial institution so that you can weigh your options thoroughly. While short sales offer a lot of promise there are also some drawbacks that you must think about too. Getting sound advice from those who work with this type of trading situation may be the most important step you could possibly take in securing your financial reputation.

The Pros And Cons Of A Short Sale

There is a lot of debate among the experts on the pros and cons of a short sale property. On the one hand some will argue that finding a property that is below the current market value creates rare opportunities for first time homebuyers to find a home that they can afford. Others debate the true interest of a bank’s willingness to take a loss on a property that can be resold.

It’s true that the bank may hold all the cards in a short sale property but that does not mean that there aren’t great deals out there to be had. Considering the fact that it is the bank that will be taking the largest hit on the loss of revenue it’s understandable that they’ll want to get as much out of the deal as they could possibly get. Here are a few other factors that you may want to consider if you’re thinking about investing in a short sale property.

Condition of the Property

While the short sale contract does state that it is an “as is” property there is good reason to believe that it will be in much better condition than a foreclosed property would be. Chances are that the owner will still be occupying the property when the sale goes through. In most short sale properties the “as is” is often a result of poor maintenance because the owner has spent his money trying to keep up with the payments rather than on upkeep.

Foreclosed properties on the other hand are often left abandoned and unused for months and sometimes years leaving them open and exposed to squatters and vandalism. The odds of getting a foreclosed property in good condition will often depend on how soon after foreclosure you make the sale.

Market Analysis

A mistake that is often made by those who invest in a short sale is to not make their own market analysis. The assumption is that you’re always going to get a great deal on a short sale but that is not entirely true, you still need to exercise caution. Do your own market analysis and determine what is the true fair market value of the property. Banks are already looking at a loss of revenue with the sale of the property so it’s going to be doing everything it can to reduce those losses.

It is clear that while short sale properties can offer some incredible deals on some ideal properties there are also some risks involved as well. If you are serious about investing in a short sale property it is of the utmost importance that you do your homework and evaluate every phase of your transaction.

If this is your first short sale it is strongly recommended that you enlist the aid of a reputable realtor that has experience with short sales but also experience with real estate in that particular community as well. You may have to pay a little out of pocket for their commission if the bank chooses not to but it will be well worth it. Short sales require a lot of time, and paperwork to get to the completion of a deal and a good realtor will be very helpful in helping you get through it all.

Questions To Ask A Short Sale Listing Agent

There are many different scenarios of a short sale that a buyer and a seller must be aware of. It is always exciting to get in on a good deal that can save you thousands of dollars so you may be eager to jump in with both feet. However, before making any attempt to put your home on the market you need to have a serious conversation with the leasing agent so that you know if they are qualified to handle the sale of your home.

What is Your Experience?

Ideally, you would expect that any real estate agent would know how to handle any type of sale but that would not be reasonable. Just like you would not expect that any teacher can teach in any classroom in the country. There are many different specialties in real estate and short sales is just one of them. You’ll want to find a short sale realtor that knows the ins and outs of this type of transaction. They will understand how to realistically value your property and what kind of offers the bank will expect. Using a realtor that is not knowledgeable could have you spinning your wheels and getting nowhere.

Can the Complete the Financial Package?

Many financial institutions have their own short sale packages that must be submitted before a short sale can be considered. This information can be very lengthy and detailed and must be submitted along with supporting documentation. Your realtor must fully understand exactly what’s involved in the financial package and be able to put it all together to help you to move the process along. If they are seasoned short sale realtors they will not have any trouble putting these packages together saving you a lot of time and misery.

How Many Offers Will You be Submitting to the Lender?

The answer to this question should be obvious. While you may have a number of offers made on the property your realtor should be focusing on only one. Lender’s have to shuffle through a lot of paperwork and don’t want to be making a decision that the realtor should be making. The realtor should be able to look through all of the different offers on the property and choose the one that is most likely to get the approval of the lending institution and submit that one. Besides, submitting more than one offer to the bank may raise some eyebrows and cause suspicions about the realtor’s ethics and activities and you don’t want to get embroiled in something like that.

There are many advantages to working with a short sale realtor rather than trying to take care of much of this work on your own. Depending on your own personal circumstances a short sale may be your best investment option for the moment but what may be a good deal could turn out to be a total fiasco if you have to work with someone who is poorly qualified to give you the professional guidance that you need.

The First Steps Everyone Should Take Before Investing In Real Estate

While it is quite common for everyone to seek some form of financial security through real estate, making wise investment decisions can often prove more difficult than they may realize. One of the first mistakes that people often make is not realizing that buying real estate is not the same as buying a retail product. One must have a systematic approach and recognize that much more is involved than finding the property you want and writing out a check.

Once you understand that purchasing real estate is more about the process than it is about the sale itself you’re well on your way to making good investment decisions. When you recognize the different stages of buying investment property the entire experience will become far more manageable than one might realize.

Step One – The Realtor

One of the biggest decisions you’ll have to make is to choose a good realtor. This should not be made casually as you will need to rely on that individual’s professional knowledge and expertise to lead you in the right direction. When you consider the weight of the choices you make in the different aspects of real estate investments you need to be absolutely sure that the guidance you get from your realtor will not lead you in a way that could cause you problems in the future. Unlike other investment options, real estate investments require a commitment that will take many years to satisfy. A good realtor could be your best ally or your worst nightmare so the choice you make will be one that you’ll have to live with for a long time.

Step Two – Prequalify for Your Loan

While some people will start their real estate search by looking at different homes before they begin the loan process there is good reason to get a prequalification from your financial institution. Even though this step is not a requirement many well-established and experienced realtors do expect it. One of the reasons for this is because it gives them the opportunity to identify you well ahead of an in person meeting and it also sets a price range that will help you to narrow down your search for your new property.

Prequalification is not the same as actually applying for a home loan; it takes only moments and can be done over the telephone if need be. If you have chosen a good realtor then they will be able to refer you to some of the more trustworthy lenders in the area. However, if you choose not to prequalify for a loan it is quite likely that you may be limiting yourself from some ideal properties that may be available.

Step Three – Decide on Your Needs and Wants

Your next step is to list your specific needs and wants in your new home. This step will be much easier if you’ve already prequalified for your loan. At this stage you can confidently determine the location you want to live in, space requirements, and any amenities you will want. You’ll know what price range you can reasonably expect to start your search in and just how much of your dream home you may realistically be able to find within your set parameters. Taking this step will certainly help you to avoid disappointments on the road to home-ownership by keeping you within the acceptable limits in the entire process.

Step Four – Start Viewing Properties

If you’ve carefully made the previous three steps then the fun will start with step four. Actually going to different homes and walking through is the point that every home shopper looks forward to. It is at this point that you get the tactical experience that most people enjoy when they start to look at properties. From this step you’ll measure each home you look at against your list of expectations.

It is at this stage that you’ll discuss with your realtor the different parameters of the market in the particular area. Make sure that you ask about the average list price for similar properties in the same area, and how many days a home will stay on the market before it is sold. Your realtor should be able to provide you with all of the information you’ll need so that you can choose the right property to pursue.

There are many different steps that a future homeowner must make in order to find the ideal property for their investment. In addition to these four steps a potential owner will have to pursue financing, have inspections made and even more. Still, with the right professionals at your side to walk you through the entire process there is no reason why making a successful real estate purchase can’t be accomplished successfully.

Recognizing The Hidden Aspects Of The Short Sale

When a homeowner finds himself unable to meet the agreed upon mortgage payments for their home it can be very distressing. The risk to their credit rating and the possibility of foreclosure can be more than a conscientious homeowner is able to deal with. This is why many have begun to look carefully at the short sale option as a means to get out from under the burden that the mortgage may impose.

While a homeowner may be faced with the loss of his home there are many benefits of seriously considering a short sale; the most obvious would be a release from the mortgage payment obligations as well as relief from the expense of maintaining the home. Another advantage of a short sale is that often the mortgage holder is willing to waive the deficiency owed on the mortgage relieving you of the burden of satisfying the debt after the deal is closed.

Still, with all of the possibilities that can be gained from a short sale a homeowner would do well to weigh all of the factors involved before embarking on such a course. While in many cases such a transaction can prove favorable for both homeowner and the lending institution there are other reasons why one might be wary of taking this step.

The Short Sale and Your Credit

For the most part, may are under the impression that a short sale can have a lesser impact on your credit score than a foreclosure however this is not always the case. According to some real estate experts the impact may in fact be about the same. This will depend on how the lending institution chooses to report the transaction. For example, a financial company may choose not to report the short sale itself but will continue to report your default payments as delinquent on your report. You will have to wait the required amount of time for that to be removed from your credit report.

There are however, other ways that this type of transaction could actually improve your credit situation. If you already have a pretty high credit score the reporting of a short sale could result in only minor damage to your credit history than those who may have a history of poor credit. While those that have a good report may still face the negative impact of a short sale the odds are that they will be able to recover from that hit in far less time.

Considering the fact that it will take just about the same period of time after a short sale as a foreclosure – seven years – for a person to restore their credit it is important for you to discuss with your lending institution how they plan to report the sale to the credit bureau.

The Short Sale and Your Taxes

Another factor that must be considered before executing a short sale is the tax liability that you may incur. In many cases, the remaining balance of debt is often forgiven by the lender, which on the surface may seem like a blessing in disguise. However, it is important to understand that the lender will be required to report the cancelled debt to the IRS, which could quite likely make you liable for taxes on that money. It will be considered as gains on your part so while you may be relieved of the burden of making those regular monthly payments you could be facing a huge tax bill at the end of the year.

According to the IRS, the reason behind this is that the forgiven debt is considered a “gift.” As a result it was considered “income” and therefore subject to being taxed.

However, there are some situations where this rule does not apply. Generally, exceptions can be applied to short sales on homes that are considered your primary place of residence (the place where you live). This type of exception falls under the Mortgage Forgiveness Debt Relief Act.

There are Always Exceptions

This is not to say that having a short sale is not worth it. Every case is unique and carries its own level of risks and rewards. There are other ways where a homeowner may be able to avoid the income tax hit when they’re doing a short sale. If you’re seriously considering doing a short sale to help you get out of your financial burden it would be well worth your while to speak to a number of different professionals to find out just how the decision could impact you and your financial future.

Who to Talk to

In most cases short sales are often handled by real estate experts but you should not limit your inquiry to these individuals. You will also want to discuss your decision with your lending institution, an attorney, and a tax expert that has a history of dealing with short sales. The reason for this is obvious.

The realtor will often tell you that short sales will protect your credit but this statement does not usually reflect the whole truth. While this may be true in some cases it does not apply in every situation. Realtors also cannot give you legal advice on different aspects of selling your property. Always remember that agents are first and foremost concerned about making commissions, which they can only make if there is a sale.

While a homeowner may be seriously concerned about avoiding a foreclosure and at the same time getting out from under the heavy mortgage they are facing, a short sale can sound very promising. In many cases a short sale can be the ideal solution for homeowners in such a situation but it may not be the only answer. It is strongly recommended that before you take the step to do a short sale that you weigh all of your possible options and get expert advice from a number of different professional perspectives so that you not only can get relief from the financial stress you’re under but that relief lasts to support you well into your future.

How Technology Has Brought In A New Age Of Real Estate Investing

Whether you’re buying a piece of property or you’re selling you’re probably thinking about the recent struggles that the real estate industry has faced in the last few years. With a bout of foreclosures, an ongoing recession, and a sudden downturn it is easy to understand why many may be facing their decisions with more than a little trepidation.

Still, there has been real evidence that the real estate market can and has proven to be profitable for both buyer and seller in many ways. One of the reasons for this is the new way to find, select, and purchase property. With the many different technological advancements now available, investing in real estate can be very rewarding.

Using Mobile Devices

Today, rather than looking at newspaper ads and real estate books people are now turning to their mobile devices to get needed information. People are using smartphones, tablets, and other portable devices to collect data needed in real time. Those who are buying properties can quickly gain access to homes for sale as soon as they hit the market and those selling properties can quickly collaborate and negotiate deals quickly and easily.

With apps readily available, contracts, bids, and other important documents can be transferred from person to person instantly allowing for deals to be made with increased efficiency. And now with the ability for E-signatures to be applied to any document deals can be made and sealed without having to deal with the logistics that were most common in the past.

Easier Search

In the past, searching for the right property was often the biggest challenge for home buyers. Searching the web and sifting the many real estate listings could be a time consuming venture. However, with the new technology available a potential home buyer can sift through the thousands of listings and narrow down the list based on their own specific parameters, speeding up the search for new homes exponentially.

Making your property search mobile has made finding the right location to invest in much more efficient than ever before. Rather than having to sift through tons of information and waiting for documentation to be delivered, reviewed, signed, and resent, decisions can be made at a moments notice. The information you receive from these mobile devices can be filtered based on a number of parameters that you the investor suggest; it could be your geographic location, price range, or even the individual qualifications of an expected agent.

In addition to all of this the information you glean can be delivered and communicated within seconds making it possible to find that right real estate investment property in record time.

The Virtual Tour

One new feature that technology has done for those who are looking to buy real estate is to provide the virtual tour. This feature is a means for a potential buyer to view a piece of property without having to be on site until they are ready to seriously consider its potential. It also helps agents and realtors to show a particular property to more potential buyers without expending the added effort to navigate the different logistics to get all parties together at any given time.


The fact of the matter is that most people already have access to this new technology. The challenge that they now face is learning how to take these advantages and use them to the best of their ability. With the ability to finalize transactions without a face-to-face interaction more deals can be completed much more efficiently.

The world of real estate has changed drastically over the years. The times of pouring through newspaper advertisements and searching the real estate listings to find the right property are gradually fading into the past. With modern technology at your fingertips finding the right piece of property to invest in is easier than ever. You will be able to save not only time and energy but by extension save money too in your quest to find the perfect home investment.

Today’s real estate industry has changed drastically over the years; with the nation recovering from the real estate crisis of the past consumers are now becoming much more wary of their investment decisions. They want to find, negotiate, and seal the deal with fewer hassles and pay less commissions at the same time. This means that a realtor will have to deliver on their promises much more thoroughly than ever before and with far less time to do it in. This could be next to impossible if it weren’t for the advancements of modern technology over the years to make the job that much easier.

Valuable Tips On Choosing The Right Realtor

Choosing to buy a home is for most people one of the biggest decisions they will ever make. Most will spend a major part of their lives planning their dream home and searching for the right fit. Still, one of the biggest mistakes that many of these people will make is that they will fail to take the same painstaking care in finding the right real estate agent.

The truth is that most people base their choice of agents on the input of other people, either a friend or relative. Some even make this important choice based on nothing more than an attractive ad campaign rather than on any knowledge they may have gained about the individual’s background or experience. However, it is important that you realize that buying property can be a long and arduous process that can involve not just property choices but financial choices that will have an impact on your life well into the future and your realtor is the one that will be at your side guiding you every step of the way. It is in your best interest for you to choose this person wisely.

Make Sure They Understand What You Need

It doesn’t matter how much experience or knowledge a realtor has if he doesn’t understand what you really need and expect. The realtor that understands your goals and expectations will be able to navigate the many twists and turns that may come up in your search process. This means that it will be up to you to verify and make sure that you understand what your realtor is offering you.

When you consider just how much money a realtor stands to make on the commission of the sale of any piece of property you’ll understand why every potential realtor is more than willing to give you a song and dance at every turn. Whatever they say you should feel confident that this is a person that you can put your trust in and that they will disclose all the facts and information you will need to make a wise and informative decision.

Get Referrals

One of the best ways to get started in choosing the perfect realtor may be to start with your friends and relatives. They may have had a good experience with a realtor and will provide you with some very high recommendations. However it is important for you to understand that your friend’s goals and objectives may not be the same as yours. This means that you would not want to rely solely on those recommendations to make your choice. You always want to have a face-to -face interview with a potential realtor to see if they can see your vision and if you will be able to communicate well with each other.

Choose the Agency First

Another option that you could try is to choose the agency first. With franchise brokers across the country you should have no trouble finding an agency with a strong reputation behind them. Choosing such an agency gives you a relationship with a well-recognized name behind them. This could get a lot more doors open to you that you may otherwise not be able to get.

Once you’ve chosen a good agency then you can choose from one of their suggested realtors. Choosing your realtor this way could get you just one step ahead of the game. Still, it is important to keep in mind that while a franchise may have a strong national reputation you should also check on the reputation of the specific office that you’ll have to deal with.

Your Realtor Should Specialize in Your Price Range

While a realtor may have a strong track record in finding ideal properties for their clients you want one that specializes in your particular needs and wants. This will require that they are familiar with the challenges that are common to your type of property search. Some agents focus their energy on high-end properties and while they may take you on as a client they may not be willing to give you the attention you expect if your target price range is under their expectations.

However, there are those agents that are accustomed to dealing with other types of properties, fixer-uppers, flipping, and low-end housing units as well. Finding the realtor that focuses on what you’re expecting will help you to make your entire search results a success.

Finding the right realtor can make a major difference in whether or not your search for a new home will be a pleasant one or one that will feel like pulling teeth. A good realtor will be more than willing to go the extra mile to make sure that your search for a new home will end up as successful as it could possibly be.

Taking Practical Steps When Investing In Foreclosed Properties

While everyone may have the idea of buying a dream home it is not always within reach. This is one of the reasons why many people choose to buy foreclosed properties. The idea is that they will find the perfect property at a discounted price and one can get into a property that they would otherwise not be able to afford.

This type of thinking is a common mistake that many people will make that can lead to some serious problems when buying foreclosed properties. The fact is that buying real estate that has been foreclosed on requires an investor to approach the transaction from a completely different angle.

It’s Not Always Easy

It’s true that you’re getting a great discount on the property you’re trying to invest in but the challenge that you may face is in finding the right location to choose. The effects of the past real estate crash has left some communities with as many as 80% of the homes foreclosed on. This floods the market with thousands upon thousands of choices so the buyer must sift through what seems to be an endless array of options that can tend to be overwhelming.

Before You Begin

Before you begin your search you should start by finding a good real estate broker to work with you. You’ll want the realtor you choose to be ready and willing to work with the financial institutions that holds the foreclosed properties on your behalf. You’ll also want to go to your own financial institution and get a pre-approval for your loan. While it is not necessary that you accomplish these two steps prior to your search, it can make a very difficult search much easier if they are done ahead of time.

Check Databases

Once you’ve taken care of the preliminaries it is time for you to begin your search. With such a large number of foreclosures on the market at any given time it will be necessary for you to filter the results and narrow down your choice of options.

There are several websites online that can automatically search through the available options and sift out possibilities that do not fit within your specified parameters. In addition to the many databases that you can choose from you can also check a number of other options to find the right investment opportunity.

It is always difficult to find and purchase the right piece of property to invest in. All of us are usually searching for something different and we each come to the table with different expectations. The entire process can be that much easier if it is approached with a very specific plan and goal in mind.

Unless you plan to pay for your real estate with cash it will be beneficial to have a strategy firmly set in place before you begin the process. It will take the edge off of many of the obstacles that you will meet all along the way. While investing in real estate may have its own hurdles having a plan will be the key to overcoming them to get into the right investment opportunity for you.

Recognizing The Differences In A Foreclosure And A Short Sale In Real Estate

While many people may fully understand foreclose properties, the term “short sale” may catch them off guard. The fact is that both of these real estate investment opportunities can be the key to helping an individual get into the home of their dreams. Each comes with its own set of advantages and disadvantages that each investor must understand before they pursue their opportunities in order for their venture into real estate will pay off.

Aside from the fact that the lending institution initiates foreclosures after the property has been repossessed and the homeowner often initiates short sales there are some distinct qualities of each type of sale that a buyer must beware of. Both types of transactions can be made at below market rates but caution must be exercised for a number of reasons before you begin the process.

Often short sales are initiated when the homeowner finds that he is no longer able to maintain the mortgage payments and have fallen behind. If something is not done to bring the loan back into good standing the homeowner may be facing foreclosure in his future. This could damage his financial credit and his future in his home. For that reason many choose to exit their property through a short sale where they can resell the property at a lower price than they owe on it.

What a Buyer Should Know Before Buying a Foreclosure or Short Sale

Because these types of investments can prove to be both beneficial and detrimental there are some very specific steps that each investor should take into careful consideration. It is extremely important that you deal with a realtor that specializes in these types of investments. They will be able to guide you through all the steps needed to complete the deal and warn you of any potential pitfalls that may be coming your way.

Always consider the condition of the property. If you’re expecting to fix up a piece of real estate then you need to be aware of the fact that foreclosures will often come with an “as is” tag and there may be many hidden problems that you will not readily be able to see with the naked eye. Short sale properties are usually in a much better condition but may not be able to bring the lower price tag that comes with them.

What You Must Remember

Regardless of the professionals that you enlist to aid you through your investment decisions it is extremely important that you do some of the research and legwork yourself. Always remember the warning, ‘let the buyer beware’ when dealing with purchasing used property. Investing in real estate is most likely going to be one of the most expensive ventures that you will have throughout your life.

In addition to understanding market prices you’ll also need to find out as much as you can about the condition of the property and any possible liens and back taxes that may be owed. When you’re ready to invest in real estate of this type it pays to take the approach slowly and methodically making sure that every detail is completed thoroughly at each phase of the sale. If you can manage each step carefully, there is no reason why you won’t be able to find your dream home at an extremely affordable price.

The Difference Between Buying A New Home And A Foreclosed Home

Many people are of the belief that the best real estate investment lies in foreclosures. While there is no question that one can find some exceptional deals in foreclosures this does not necessarily mean that buying a new home cannot offer some of the same if not better deals. There are pros and cons for each argument and it would be well worth your while as an investor to understand both sides.

Buying a New Home

The obvious caveat of buying a new home comes with the warranty protection that you will get. New homes have this added protection in the event that something goes wrong with the building that is a result of inferior materials or poor construction workmanship. New homeowners have the luxury of knowing that they will not be responsible for out of pocket repair costs if something were to happen.

Those who choose to buy new homes also have the advantage of better financing options. Some incentives set in place can save you thousands of dollars off the total cost of buying the property making it that much easier to secure adequate financing for the home of your choice.

Finally, when purchasing a new home you can often work directly with the builders to get the home you really want. If you begin the deal early enough you could customize certain features of the home; choosing the right cabinets, floors, and space design well before the home is completed. This means that you can end up with a home that will reflect your personal tastes and personality.

Buying a Foreclosed Home

By contrast purchasing a foreclosed home may get you lower prices overall but you also have to make some sacrifices in the process. There are a number of risks and challenges that come with purchasing these types of property. For the most part these homes come “as is” leaving you with no warranty or protection if something goes wrong.

In many states by law, any home set for resale is required to come with a “full disclosure” clause that should clearly point out any particular problems that the property must have. However, with foreclosures this is not the case so the buyer leaves himself vulnerable to any number of difficulties and challenges that may come along. If something were to happen the buyer has no possible recourse if problems are found later on.

Finally, there are always the many financing challenges that may come up. While you may have the luxury of securing financing after you’ve found the home of your choice, it is strongly recommended by many realtors that you secure your financing well-before you begin your search for the foreclosed property. At the very least this phase must be completed before you begin the bidding process.

There is no way to tell anyone which real estate investment option is the right one for you. Your decision will depend on your personal expectations and circumstances. However, understanding the common misconceptions that come with investing in real estate is a major step that everyone should take to make the transition to home ownership much more attainable.