The choice might be to buy a home during a short sale, while in foreclosureForeclosure is the legal action taken to extinguish a home owner's right and interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds. in a property, so that the property can be sold in a foreclosure sale to satisfy a debt. or once the bank owns the home as an REO; each of these has its pros and cons in the home buying process.
Q: I live in a house on our two hundred acre farm. The property next to us is on about ten acres with a small 1,500 square foot house. The property owners failed to pay their power bill and moved away. Now, the home is scheduled to be foreclosed on soon.
I would be interested in expanding my farm by purchasing this property. We would pay cash. I have read that the three options are to try to buy as a short sale prior to the court house steps, try to buy on the court house steps, or buy from the bank after the court house steps.
Any input on the alternatives and overall process would be greatly appreciated.
A: You are correct that you could try to buy the home from the current seller and see if he or she can work with the lenderA Lender is a person, company, corporation, or entity that lends money for the purchase of real estate. to have the sale approved as a short sale. However, for a short sale, you have to have a willing seller to work with before you can get the lender to agree to the sale.
In a short sale, the owner of the property might list the property for sale with a real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. agentAn Agent is an individual who acts on behalf of a consumer. A real estate agent represents a buyer or a seller in the purchase or sale of a home. Licensed by the state, a real estate agent must work for a broker or a brokerage firm. An insurance agent helps a consumer purchase an insurance policy. Insurance agents are also licensed by the state.A Real Estate Agent is an individual licensed by the state, who acts on behalf of the seller or buyer. For his or her services, the agent receives a commission, which is usually expressed as a percentage of the sales price of a home and is split with his or her real estate firm. A real estate agent must either be a real estate broker or work for one.. You see the listingA Listing is a property that a broker agrees to list for sale in return for a commission., call the agent and make an offer on the property just as you would with any other real estate you might intend on buying. However, the seller can’t close on that sale because the seller is short the funds to close. The only way the seller can close is for the seller’s lender to agree to accept less than what the lender is owed on the loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest.; hence the term short sale.
You can bid at the foreclosure auction what you think the property is worth. However, auction or foreclosure sales are for more sophisticated real estate buyers. You would want to know what you are getting at auction. You might bid one price for the home only to find out that there are other issues with the titleTitle refers to the ownershipOwnership is the absolute right to use, enjoy, and dispose of property. You own it! of a particular piece of property. to the property that may cause you a headache down the line. Also, the process is easier in some states and harder in others. In some states, you might have to have some or all of the cash for the purchase ready on the day of the sale or within a couple of days after the sale.
Once the lender has foreclosed on and owns the property, the lender may list the property for sale with a real estate agent and you can try to buy the property in the same way you might bid on a property for sale that is not owned by a lender. When properties are owned by lenders, they are sometimes referred to as REOs (real estate owned).
While you may find dealing with a lender frustrating and the negotiation process can take a while, you can end up owning the property and can try to negotiate the contract to protect your interests and make sure you are getting good and clean title to the property. Frequently on REO properties, the seller will want to close soon after the contract is signed.
For most buyers, the first and the third option are the preferred alternatives when dealing with distressed properties. However, if you have a team of professionals to work with (a good real estate agent, real estate attorneyA Real Estate Attorney is an attorney who specializes in the purchase and sale of real estate., insurance agent and settlement agent) you might be able to work the auction or sheriff sale to your benefit and buy the property during the sale process.
But make sure you understand the process and work with people that have in depth knowledge of the process in your state and in the locationLocation is where a property is geographically situated. "Location, location, location" is a broker's maxim that states that where the property is located is its most important feature, because you can change everything about a house, except its location. in which the sale will occur.