buying a short sale home

Pros and Cons of Buying a Short Sale Home

Short sales are becoming more and more common. Why is this fact true?

Many people bought homes at the height of the housing market. They leaped at the chance to have a zero-down policy and a beautiful home, too. So when the prices of houses went down faster than they came up, people were stuck with a home they couldn’t afford.

Short sales happen if both the homeowner and the bank agree that it would be best. To avoid foreclosure, many look to a short sale instead. This is a “cut your losses” compromise that allows both parties to get away as free as possible.

The upside? More people are considering buying a short sale home at a major discount.

Like anything, there are pros and cons to this method of obtaining a house. This article will lay out both sides so you can make an informed decision.

Advantages and Disadvantages of Buying a Short Sale Home

Buying a short sale home may not be for you.

But maybe it is!

Let’s review what purchasing this type of home entails. Then we’ll get the pros and cons in order.

What Is a Short Sale Home?

A short sale is when a property is sold for less than the balance that remains on the mortgage. This occurs to avoid foreclosure, which is costly for the bank and your credit report. Foreclosed homes get bought by the bank, and it’s not an inexpensive process.

Buying a short sale is very similar to buying a regular home for sale. The main difference between the two is the addition of a third party or escrow. This third-party lender has to approve or disapprove of any offers and negotiations.

Short sales typically occur when the homeowner can no longer afford to make payments. This can be due to personal or financial reasons. Many people saw this coming after the 2008 housing market crash. It turned 5% more of the population into renters.

2008 is in the past, and the market has been looking good for a solid decade with no hints of crashing.

Are you still in the buying market? Here’s what you need to consider with a short sale.

What Are the Pros of a Short Sale?

There are many advantages to this process:

  • Potential to get a great deal on price
  • Fewer people are looking into short sales, meaning more opportunity for you
  • You avoid the pitfalls of buying a foreclosure
  • Tenets usually maintain the space until moving time. This doesn’t happen as often with foreclosures

If you see a home that you love, don’t you want to live in it? Short sale homes should be no different. Find a home you love and go after it.

After all, it’s much better than considering a foreclosure. Foreclosures come with a laundry list of disadvantages:

  • They’re not usually located in a prime neighborhood or area
  • You have to buy the home “as is,” which means that once you’ve purchased it, the problems are yours, too
  • The prices of foreclosed homes are harder to negotiate. You’re working with a bank that needs to make its money back

Go look at a short sale today, and chances are it’s in a nicer area than a foreclosure would be. Most people who sell their homes on short sale bought them with good intentions.

What Are the Cons of a Short Sale?

There are some unfortunate aspects involved in purchasing a short sale home. We emphasize that the biggest issue with short sales is the time it takes for approval. And even then, approval is not always a guarantee.

Are you willing to take the risk? Here are other things you’ll have to gamble:

  • A lender has to approve of the short sale. Without their approval, there’s no done deal
  • It may come at a competitive price if the owners are trying to squeeze out as much as possible
  • Once again, the wait time can be longer than that of a regular home sale
  • There may be extra costs in the repair of the home

The best way to avoid some of these pitfalls is to get a look at the home. Does it need extensive repairs? If you don’t have the extra cash for renovation, you may need to look elsewhere.

If you’re able to look inside and determine the cost is worth the effort, then you’ve got an easier decision to make. This isn’t always possible. Once again, risk comes down to a key player in this decision.

Is This the Right Decision for You?

We hope this guide led you to that answer.

If you’re not in the market for an immediate move, then a short sale may be right for you. Got a place to stay while you wait for the process to wrap up? Then you’re good.

If you’re not afraid of a little work and time, then buying a short sale home is right up your alley.

Do you need to move right away? Then you might want to consider something else. A short sale has the potential to be a long process.

If you don’t have the time or the patience to wait, then it’s not for you.

A short sale comes with many benefits if you’re willing to put in the effort. It requires the same love as your average home up for sale.

Are you in the market? Check out our short sale blog for great information!

how to avoid foreclosure

10 Tips for How to Avoid Foreclosure

Right now in the United States, there are over 600,000 properties that are in a state of foreclosure.

Foreclosures can mean much more than a loss of property. They can have lingering effects on your future, your credit history, and your daily life.

Even though your phone won’t stop ringing and the bills won’t stop coming, it doesn’t mean this is the end.

Here are ten tips on how to avoid foreclosure.

1. Consider a Short Sale

A short sale is a way to recoup the financial loss by selling your home below market value. Securing a buyer relieves some of the financial burdens and helps to save your credit.

This is the option for homeowners facing the near threat of foreclosure. In order to complete a short sale, you must be unable to refinance your mortgage and unable to sell your house at a price that would cover the mortgage.

Once a short sale is complete, your mortgage dealer forgives any remaining debt. Not all properties qualify for a short sale, so it’s important to talk with your lender.

2. Take Advantage of the Making Home Affordable Program

The Making Home Affordable program offers mortgage relief to help those avoiding foreclosure.

This federal program allows eligible homeowners the opportunity to reduce your monthly mortgage payments and explore any other available options. Options can include:

  • Lowering your interest rate
  • Extending the life of your loan
  • Lowering the loan principal

The end goal is to reach a solution that can be sustainable for you in the long-run.

3. Refinance Your Loan for Lower Payments

Refinancing your loans is one of the many ways to prevent foreclosure. The earlier you act, the better chance you have of refinancing.

Refinancing replaces your current mortgage with a new mortgage. The new mortgage will come with new terms, interest rates, and monthly payments. Your lender will look at your credit score and the ability to meet your new payments when granting a new loan.

Each loan is different, so it’s important you find the one that’s right for you.

4. Get in Contact With Your Lender

Contacting your lender can be a viable option for stopping foreclosure.

Opening the doors of communication lets your lender know you are willing to put in the effort to stop the foreclosure process. If you have trouble getting in contact with your lender, there are resources to help.

During this process, it’s important to keep track of all correspondence sent to you by your lender and document any phone calls. This will help you stay organized and be ready to take advantage of any opportunities that come your way.

5. Talk With a HUD-Approved Housing Counselor

Get in touch with a housing counselor to help you navigate all your options. These trained professionals work with people like you every day and understand the ins and outs of foreclosure.

Foreclosure prevention services are available in every state and are available free of charge. The counselor can help you understand the law, organize your finances, and represent you in any negotiations with your lender.

6. Sell Your Assets

Selling your assets can be used to help get caught up with mortgage payments. This could include selling the second car, parting ways with a few family heirlooms, or cashing out a retirement plan.

Saying goodbye to these assets can be hard, but if used appropriately may be a great way to avoid foreclosure. You can always buy back possessions after your finances are back in order.

7. Create a Forbearance Agreement

Have you experienced a job loss or a sudden illness? Are your financial struggles a temporary situation? If so, forbearance might be the right option for you.

A forbearance agreement involves your lender agreeing to lower or stop mortgage payments for a short period of time. This allows you some time to get back on your feet to help with stopping foreclosure.

You must resume full payment at the end of the forbearance period. You also must pay any additional amount needed to be current on missed payments, which includes principal, interest, taxes, and insurance.

8. Consider a Deed in Lieu

A deed in lieu transfers ownership of the home in exchange for a release of your mortgage obligation. This immediately releases you of any obligations associated with the loan.

There are different options available with a deed in lieu that involve you leaving the home immediately, staying in the home for a few months without paying rent, or leasing the home for up to a year.

A deed in lieu can appear on your credit history for up to seven years.

9. Bridge Your Income Gap

While finding a new, high-earning career may not be the answer, now is a good time to tighten the purse strings.

Cut back on things around the house you don’t need. Try getting rid of cable, shopping at discount stores, packing your lunches, or picking up odd jobs around your neighborhood. Any extra money can be spent to help get you back on track with your mortgage payments.

10. File For Bankruptcy

Considering bankruptcy as a way to avoid foreclosure should be treated as a last resort. Bankruptcy can lead to the loss of other assets besides your home and will appear on your credit history for up to 10 years.

When you file bankruptcy, collectors are forbidden by law from collecting on outstanding debts including your mortgage. Bankruptcy will allow you more time to get your finances together. Your mortgage company will be required to create a reasonable repayment solution with you, which could help you save your home.

Need More Information On How To Avoid Foreclosure?

Make sure you do the research to figure out what option works best with your situation. Our team at Short Sell Blog will help provide you with up to date, well-researched information on how to avoid foreclosure and get on with your life.

Never hesitate to contact us for help when it comes to your home and foreclosure.

foreclosure homes

How to Fix up Foreclosure Homes and Turn a Profit

Are you considering buying a foreclosed home?

Foreclosure homes often require extensive tender love and care. After all, if the owners were unable to continue their mortgage payments, it’s unlikely they were keeping the home in good repair.

According to national statistics, one in every 1,835 homes results in foreclosure.

While a foreclosure may be every owner’s worst nightmare, they can present a unique opportunity for buyers. Although these properties often require substantial work, they can prove to be extremely profitable for buyers.

In this post, we’ll reveal six must-know strategies for maximizing your profits on a foreclosed home. With these tricks of the trade, you can be well on your way to buying your first foreclosure home.

1. Enlist Professional Help

First things first–it’s essential to enlist the help of professionals. This is especially the case if this is your first time purchasing a foreclosure.

Hiring accredited professionals not only ensures a quality-grade job is accomplished but also helps to avoid any legal stipulations.

Be sure to utilize a real estate professional who has specific experience in purchasing foreclosures. These professionals will be aware of which neighborhoods are best to invest in and which properties are beyond-renovation.

Next, you’re going to want to hire accredited electricians, plumbers, and contractors. While hiring a professional may prove to be expensive, it’s always worth it in the end.

2. Location, Location, Location

We hear it all the time–location is key when it comes to the perfect property! The same rule applies to foreclosures.

Be sure to research the area properly before committing to a purchase. This will be a significant consideration down the line for buyers.

An important factor to note is whether or not the home is close to a public/private school. This can be a “make it” or “break it” condition for a serious buyer with a family. You also want to consider how many shops, restaurants, and grocery stores are nearby and how accessible they are.

Public transportation is also significant when it comes to a property–especially if the home is outside the inner city. Make sure transit is easily accessible, otherwise your home may not be as valuable.

Taking note of these important aspects can really affect the sale of your home down the road.

3. Focus on the Most Important Rooms

One of the most challenging aspects of renovating a home is deciding where to spend your money.

That being said, it’s crucial to decipher which renovated rooms result in the utmost profit. According to Architecture Lab, the most important rooms to focus on in a renovation are the kitchen and the bathroom(s).

When choosing your finishes, be sure to select a style that has broad appeal. Have a real estate or design professional provide you with advice as to what styles are currently trending.

This is where the bulk of your money will be spent, so it’s crucial to invest it wisely.

4. Upgrade the Interior Systems

While it may be tempting to focus on the elements of the home that are only visible to buyers, it’s equally important to focus on the interior systems.

Remember, buyers expect the home’s mechanical and electrical systems to be in good working order. Generally speaking, these are not items buyers are willing to upgrade after purchasing a turkey home.

As a general rule, be sure to focus on:

  • Heating and air conditioning
  • Water heating
  • Plumbing
  • Wiring

When it comes to upgrading these systems, save yourself a headache and enlist the help of a licensed professional. Consider that some states have legal rules and regulations stating that a professional must be used for these services.

While these upgrades may prove to be expensive up front, they’re vital to maximizing the eventual profit of the home.

5. Paint and Flooring

First impressions are everything. That’s why when you open the front door to your home, you want to feel instantly welcomed.

There are two very important factors that will aid in this: paint and flooring.

Paint can be one of the most cost-effective ways to improve not only the interior of a home but also the exterior. A fresh coat of paint can instantly brighten up your home and do wonders for the eye.

A bright, light color for the interior can immediately change the mood and feel of your home. It will update it drastically without a tremendous amount of effort or cost.

This same rule applies to the exterior. Curb appeal is everything, so make sure to freshen up the house, shutters, and deck with a complementary color.

Second is flooring. Whether it’s updating the current with a quick stain or replacing it altogether, your flooring creates a flow that should complement the other elements of your home.

Special designs or tiling can help draw the eye to key areas, such as the kitchen or entryway. This helps to add that special uniqueness for a potential buyer down the road.

6. Don’t Overinvest

While it may be enticing to pour your heart, soul, and wallet into your first foreclosure renovation, it’s crucial to limit yourself.

Yes, it may be tempting to renovate every nook and cranny of the home. But it’s important to resist this temptation for the sake of time and money.

That being said, have your real estate professional keep you updated with the property values of your neighborhood. Always ensure that you are not renovating the property above the value of neighboring properties.

While it may be nice to have the most beautiful home on the street, this often has an adverse effect on your future property value.

The Perks of Purchasing Foreclosure Homes

If you’re contemplating the pros and cons of purchasing a foreclosure, it’s vital to understand how to best profit from such a purchase. While purchasing foreclosure homes may require extensive time and money, the profit can be exceptional.

But, it’s also safe to say that not all foreclosed home are created equal. From choosing the right foreclosure in the right neighborhood to selecting which rooms to focus your restoration on, there certainly is a right way to renovate.

Looking for more tips on purchasing a foreclosure? Visit our website for our expert tips and tricks of the trade.