Are you looking to buy a short sale or foreclosed home in Northern Virginia? Do you know the difference between the two? Is a real estate agent and a REALTOR the same thing? It can be hard to keep up with real estate jargon, but our agents are here to help answer any of your questions. Well, there is a difference between a real estate agent and a REALTOR, but that's for another time. First, we're going to explore the differences between a short sale and a foreclosure and how this can affect you. Sure, these types of home sales are an excellent way to buy a property for cheap as chips, but there are a few things to consider before jumping in head first. Keep reading to learn more about the pros and cons of each option.
What exactly is a short sale? This type of home sale occurs when the homeowner owes more on their home than it's actually worth. The money received from the sale is also not enough to pay the balance on the liens of the home. Essentially, the lien holders are agreeing to release the liens on the home in exchange for less than they're owed.
- Homes are usually sold below market value.
- Short sale homes are usually in better condition than foreclosures because the homeowner is often still residing in the house and maintaining it.
- Short sale homes are less expensive than regular priced homes because lien holders want to get paid sooner rather than later.
- If you purchase a short sale home, you're avoiding adding to the amount of bank owned properties.
- There are usually less fees involved than a foreclosure.
- Short sales often take a long time to close.
- Sellers must qualify and be considered eligible before being able to list their home as a short sale.
- Issues may arise with short sales when lien holders don't get paid – often because the sale price of the property isn't enough to pay off the second mortgage.
- Lenders may block the sale if not satisfied.
Foreclosures occur when a homeowner fails to pay their mortgage and/or keep up with mortgage payments. Usually this happens when someone loses their job, gets divorced or is suffering from medical issues. A bank or lender will attempt to recover the balance of the mortgage by forcing the sale of the home and using it as collateral for the loan. Many banks don't sell homes directly to investors or homebuyers, but if they do, they'll likely list them through a real estate agent. Some real estate agents specialize in foreclosure and short sale listings and they're called REO agents or Real Estate Owned agents.
- Buyers can purchase a home for bottom dollar.
- Foreclosed homes are usually sold below market value for the purpose of quickly offloading it. Buying a foreclosed home can often be financially rewarding if you choose to purchase, flip it and resell for profit.
- Foreclosed homes are sold as-is, so banks are not responsible for any damages to the property. This can result in a risky investment.
- Buyers are often not allowed to see the inside of the home before they buy it, and damages can become your responsibility.
- Some homes may have been ransacked by the previous owner.
Buyers that invest in foreclosed homes will often flip them and sell them for a profit. If you choose to buy a foreclosed home, be sure to spend less than 10% of the purchase price to renovate. Make sure the resale value is worth your time, money and energy. With patience, foreclosures and short sales are effective ways to land a home for an extremely affordable price. Do some research and be sure to have a proper home inspection completed!
Have you ever purchased a short sale or foreclosure? Comment below and let us know about your experience!
Contact the Amanda Davidson Real Estate Group to learn more about short sales and foreclosures in Northern Virginia. Or call us at (703) 988-3151.