Short Sale vs. Foreclosure
Short Sale vs. Foreclosure
So you’re looking to buy a home and you want a great deal, right? Of course you do! Every buyer we work with is looking for the best deal possible and typically, when looking for those deals, we end up considering two types of properties. Short sales, and foreclosures. Now, before we go any further, I’d like to point out that all short sales and foreclosures in Oregon and Washington are listed on our websites: www.portlandrealestate.com & www.Matinrealestate.com.
Okay, so now you’ve visited our website and seen all of the “distressed properties” that are currently available and you’re chomping at the bit to make an offer. But first, let’s talk a little bit about the differences between a short sale and a foreclosure so you know what you’re getting yourself into. A short sale means that the homeowner has encountered some sort of hardship and is being forced to sell the home for less than they currently owe. In other words, the price they’re selling for, is short of what they owe. A foreclosure on the other hand, means that for whatever reason, the homeowner has no way to pay their mortgage and cannot sell the home. Maybe they’ve tried and failed to do a short sale, or maybe they didn’t even bother to try to sell at all. Regardless, they’ve decided to just walk away and hand over ownership back to the bank and now the bank is trying to sell the home to recoup their losses. In either scenario, these homes tend to look like great deals and buyers get super excited to make their offers and get the ball rolling. But are these deals truly as good as they seem?
Well first of all, when dealing with a distressed property you’ll find that they typically need much more repair than a “traditional” property. So maybe the sales price is really low, but after inspection you find that you need a new roof, or maybe the sewer line is broken, or you need a new furnace, etc, etc. So now, all that money you saved just needs to go right back into repairing whatever is wrong with the home. Another issue with these properties is that it’s very difficult (and sometimes impossible) to finance them. As we’ve discussed, a distressed property has often times fallen into disrepair which means it cannot qualify for traditional financing like an FHA, VA, or conventional loan. Furthermore, regarding a short sale, the bank may not agree to the price that the home is listed for. On any short sale, the seller must put their home on the market and wait for an offer before they can submit that offer to the bank for approval. The bank then has to decide:
- If they even want to sell the home (which they may not).
- If they want to counter the offer. Their counter offer may end up being five, ten, 100,000 dollars more than the original list price.
This all just depends on the banks individual financial platform as well as the sellers information. Unfortunately, we as buyers have no idea what these factors may be before hand and must submit an offer to find out. This makes for a very difficult and time consuming transaction.
So okay, you’ve decided you don’t want to deal with the hassle of a short sale. But what about a foreclosure? Well, a foreclosure comes with it’s own set of difficulties. It’s very common for a foreclosure to have a number of auctions on it. So even though the list price is very low, it may actually end up selling for potentially hundreds of thousands of dollars more than it’s listed for.
All these factors can make for a very frustrating experience and in our experience, it often times makes more sense to just find another property. Maybe there’s another listing in the same neighborhood that we can make an offer on, or maybe we can approach the neighbors and see if they’re interested in selling. You never know, so it doesn’t hurt to ask!
But in the end, the choice is yours as the buyer so it’s our job as agents to help you through the process. So if you or anyone you know is looking to buy or sell real estate, please reach out to us. Whether you’re looking at a distressed property, or a traditional deal, we’re here to help!
Please, share this blog with your friends and family and consider us your Real Estate Experts in the Portland & SW Washington areas!