Short Sales and Underwater Properties: What You Need to Know

 

Short Sales and Underwater Properties:  What You Need to Know

 

Do you want to profit from the current state of the real estate market?  For most homeowners and buyers, this is not the time to buy or sell.  But, if you have the needed financial resources and are able to buy, this is the perfect time for you.  Not only can you get low-priced properties, but you can easily turn a profit.  You can do so with flipping.  You buy a foreclosed or short-sale home, make needed improvements, and resell it.

 

As previously stated, you can buy these cheap properties as foreclosures or short sales.  Of course, you want to examine foreclosures.  These properties can usually be purchased for dirt cheap.  Unfortunately, foreclosure isn’t pretty.  It can take months, there is a lot of competition at fast-paced auctions, and you may be left with home occupants who refuse to leave the home unless by force.  If you are new to buying real estate, foreclosures may sound like more trouble than they are worth.  Truthfully, they can be.  That is why you should consider short sale properties.

 

Short sales are foreclosure alternatives.  Borrowers cannot afford their mortgage payments any longer.  A foreclosure will happen.  The only question is when.  As previously stated, foreclosures aren’t pleasant.   Complications arise for everyone involved.  For mortgage lenders, they are costly, full of hassle, and time-consuming.  For borrowers, they are embarrassing and damaging to one's credit.  To avoid foreclosure, a short sale is decided on.  This is when the lender agrees to sell the home for less than the outstanding mortgage.  For you, this should mean a steal!

 

So, what do underwater homes have to do with short sales?  Nothing good.  Short sale homes are sold at less than the outstanding mortgage.  If the homeowner owes more than the home is worth, you, as a buyer, will not get a good deal.  That is why caution is advised.  Most mortgage lenders and real estate agents will take the home’s appraised value into consideration, but not all do.  You must first receive the home’s appraised value before agreeing to a short sale or making an offer.  Short sale properties should result in a good deal.  For that good deal to happen, pay less than the fair market value.

 

In short, the only way to tell if you are getting a good deal with a foreclosure short sale is to compare the selling price with the home’s appraised value.  If they are even, rethink your decision.  If buying a new home, no harm will come from paying fair market value.  On the other hand, if your goal is to turn a profit with flipping, bargain or move on.  The less you pay, the more money there is to be made.