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Kristina Jarczyk

Broker Associate

Short Sale

A "Short Sale" occurs when a homeowner is upside down on their home and ends up selling their property for less than what is owed on the mortgage. The lender agrees to accept the lesser payment as satisfying the loan amount. The seller receives no money from the sale of the home and the lender does not report as a foreclosure to the credit bureau.

To qualify for a "Short Sale", homeowners must demonstrate a hardship and be financially insolvent. The homeowner should be able to demonstrate inability to make the loan payment. Most importantly, homeowners must prove a willingness to cooperate with the process

For the potential real estate buyer a short sale offers a great opportunity to purchase what may earlier have been an unaffordable property. Typically the short sale listings are lower priced than similar properties, they are typically sold 'as is' and the buyer needs to be aware that the process can take much longer than usual. Lenders may take weeks to review their offer so the buyer has to be patient. For the patient buyer however, the reward may be a great home at a great price.

  

REOs (Bank Owned Properties)

Most REOs, the industry term for bank owned properties, are sold 'as is'. The conventional wisdom is that banks will do nothing to the houses before the sale.

Many foreclosed homes are in less-than-min condition. Often, the former owners were struggling to pay their bills and may have neglected routine maintenance. Or, they may have trashed the properties before leaving.  Once a property is seized by the bank, it sits vacant and falls further into disrepair.

The upside is a great deal on the price and closings can be quick.

 

Financing for a Foreclosure Home

While it's always a good idea to get preapproved for a mortgage before you start shopping for a home, it's even more critical when you're shopping for foreclosed properties. Even if you have stellar credit, some lenders won't make a loan on a distressed property. Other lenders will only offer a mortgage if the house is in decent condition.

If your loan officer is willing to make a loan on a foreclosed property, find out what criteria the home needs to meet in order to qualify for a mortgage. You can expect the lender to allow cosmetic repairs, but be unforgiving of termites and other serious fixes.

  

Importance of a Home Inspection

Even if a home is brand new you want to get it inspected. But inspections are especially important when you're dealing with homes in foreclosure. When people have trouble paying their bills, they typically put off the regular maintenance on their homes. Once a home is seized by a bank, it then sits vacant and falls even further into disrepair. In a worst-case scenario, a homeowner could be so angry he lost his home that he actively destroys a property before he moves out. Without an inspection, you won't be able to estimate the cost for repairs or be able to know a home's true condition.

 

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