The Foreclosure and Short Sale Hype

Every buyer in today's market seems to have a mantra. Let me see the foreclosures first!

They may have a point. Properties that are in the foreclosure process or have been foreclosed upon can many times be purchased at a bargain.

Properties in the foreclosure process which are on the market for sale are usually short sale listings. Short sales occur when the purchase price of the property will fall short of the oustanding liens on the property (like a mortgage) and the costs associated with the sale. In these situations, the lien holders will be asked to release their lien allowing the sale to occur. Since the seller is in a "distressed" situation they are willing to sell the property at below market price to find a buyer quickly. The lender may approve the short sale because it is less costly than conducting a foreclosure and rehabilitating the property back to health after the foreclosure occurs. What's the catch? Short Sale Buyers need to be very patient and accomodating as short sales take 4 months to a year to complete if they go through at all. Less than 20% of the short sale properties on the market actually sell. Additionally, since the seller does not have any money the buyer is usually asked to pay for some of the escrow expenses (ie Termite Inspection) which they usually would not pay under normal sale circumstances.

A Foreclosed property has already been seized by the lien holder and has been placed on the market to sell within 30 days. Unlike short sales, these properties can be sold quickly. The lien holder who now owns the property is motivated to sell quickly at an attractive price because they need cash fast because of the financial struggles facing financial institutions. Addtionally, they do not want to follow the market down by pricing at or above the market. Therefore, the buyers benefit from good pricing and a good value buy.

For a free list of foreclosures in your preferred area, contact one of our columnists today.

-Kalama Kim, Realtor, BIC
Coldwell Banker Pacific Properties