In terms of short sales and foreclosures, a lot of focus is placed on profits. Yes, if you invest money into foreclosures and short sales, you should turn a profit. There is however one aspect that many rarely take into consideration. That is buying a first home. If you are a hopeful homeowner who is operating on a limited budget or if you just want to limit your costs, foreclosures and short sales should be examined. Anymore can make a purchase offer. They aren’t just for investors.
Now that you know it is possible for anyone to buy short sale properties, is it the right choice for you? It depends. Using short sales to buy a first home does have its pros and cons. What are they?
A good value for the money. If you didn’t already know, short sales are properties sold for less than the outstanding mortgage due. For mortgage lenders and borrowers, they are ideal alternatives. Mortgage borrowers avoid embarrassment and the negative financial consequences of foreclosures. Mortgage lenders are able to avoid long and costly foreclosure proceedings. Since most homeowners owe less than the value of their home, you get a good deal. For example, if the outstanding mortgage is for $120,000, you could expect to pay around $100,000. This does seem high, but not when you get a property valued at over $200,000. You still benefit from covering the outstanding mortgage.
Most homes are well-kept. Of course, you will need to make needed upgrades and repairs. Homeowners who are unable to pay their mortgage, are unlikely to afford repairs and upgrades. The home may need a new roof, new carpeting, and so forth. With that said, most homes are in good condition. Homeowners with delinquent mortgages care about their homes, they just can’t afford them any longer. With foreclosures, you get squatters. These delinquent buyers refuse to leave the home without force. These disgruntled persons are likely to damage property, as they honestly don’t care anymore.
Can later be resold for a profit. If you are looking to buy a cheap first home, your goal is to get a good deal now. Don’t discount the future financial benefits of short sale properties. Since you get a good value for your money, you automatically profit. Using the above mentioned example, if you purchase a home with an appraised $200,000 value for only $100,000 you automatically profit from the resale. Add in years of improvements and upgrades and that value should only increase.
The process does take time. Most mortgage lenders consider short sales a last ditch effort to avoid foreclosure. They take time to accept a purchase offer. During that time, they are comparing short sales with foreclosure and possibly waiting for a better offer. Some report waiting more than six months for lender approval. Luckily, if you are renting you are in a relatively good position. Negotiate with your current landlord. Let them know you are in the process of trying to buy a property. If you have history of being a good and paying tenant, they may operate on a month-by-month basis.
The cost is higher than foreclosures. Typically, foreclosures have lower selling prices. As previously stated, short sales give you a good value for your money. This is because you get a relatively well-kept for home without going through an intimidating and fast paced foreclosure auction.
So, should you buy a short sale property as a first home? The decision is yours to make. It won’t hurt to look, but if you goal is to avoid intimidating foreclosure auctions and get the best value for your money, foreclosure short sales should be closely examined.