After experiencing years of depression, Florida’s housing market is returning. Moreover, it contains many homes that are being marketed as either short sales or foreclosures. For anyone interested in potentially purchasing one of these homes, the following information is critically important. Here are some differences between foreclosure & short Sale.
First is the condition and price of the home. Since a foreclosure occurs because the homeowner stopped paying their mortgage, they were likely unable to afford to maintain the home as well. This could mean the property needs major repairs, such as a new roof, which can be quite costly to repair. Foreclosures normally sell “as-is” with no guarantees from the seller, usually the bank that foreclosed on the mortgage. A home that is selling as a short sale will likely be in better condition than a foreclosed property. This is because the owner is still living in and maintaining the property. On the other hand, a foreclosure may have been sitting vacant for a year or more.
Other factors that differ between foreclosures and short sales are the price and time needed to close. Foreclosures generally happen faster than short sales and their prices are lower because the home may need major repairs.
Short sales often have higher prices than foreclosures. But, unless the mortgage holder has already agreed to the selling price, it will still need approval before transferring of the title can happen. It can take up to 6 months to get approval. And then there is a large amount of paperwork the seller must complete to prove to their mortgage holder that they are even eligible for a short sale. You could wait for a year to purchase a short sale and then still lose the property. This can happen due to the current owner’s financial situation. Foreclosures may close quicker because the property is already vacant. And, the bank is losing money every day they are in possession of the property.
Finally, the closing costs and financing options available for short sales and foreclosures vary widely. Some lenders may require foreclosed properties to be repaired before they will offer a mortgage. But, since you do not yet have the mortgage you would essentially be repairing someone else’s home. Short sales can be very time-consuming and loan documents may even expire and need to be updated before being submitted. Every seller is different. However, it is important to remember when purchasing a distressed home that the seller neither has nor wants to spend money on the property or the closing costs. So, you must be prepared to do so for the sale to occur.
If you have questions about foreclosure, loan modification, short sale, bankruptcy, or other alternatives, please feel free to call my office at 888-886-0020, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.
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