I've been helping First Time Buyers for 23 years as a mortgage professional and I will tell you what I have always told my clients here in New York: If you are a First Time Buyer, steer clear of foreclosures and short sales.
For Short Sales, my attitude of late is that First Time Buyers should steer clear. Short Sales tend to be a better deal for the homeowner than for the Buyer. You'll wait MONTHS for the homeowner's Lender to approve the short sale; maybe as long as Six or Seven Months. Meanwhile, you're stuck in a contract to buy that home. I closed a short sale recently with a Buyer who, after seven months said this at the closing table, "I don't even want this house anymore."
And he didn't even get the "deal" on price he thought he was getting! The house appraised for only slightly more than he paid for it at the short sale price. He walked into this deal thinking he was buying a home for $100,000 less than it's value. In the end that wasn't the case.
There are plenty of motivated Sellers with their homes listed on your local MLS. Go find a good Local Mortgage Banker, get prequalified, then find a great, experienced Realtor, and buy the home you want at the price you're willing to pay.
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They are "upside down" or "under water" on their loan.
The seller will list the home and when they get an offer, ask the bank to accept less than is owed for the home..... allow them to walk away.... and forgive them from having to pay off the full balance of the loan.
Briefly - it works like this:
The seller lists the house..........tries to get fair market value...or close to it............they sign a contract (house is sold as is) and all the paperwork goes to the bank for their FINAL APPROVAL....everything is subject to the bank's or lender's approval.
This process can, and usually will, take many months, and may never be approved or close.
The bank can come back after several months and ask for more money than the seller agreed to......the bank can pretty much do anything they want - each lender is different.
This gets more complicated if there is more than one bank involved.
So, yes, this can be a difficult and frustrating process.
So.....can you get a good deal? maybe.........
Will you pay fair market value? maybe
Will it definitely close at some point months down the road? maybe not!
Hope this helps
Banks prefer this process because it is less costly than the foreclosure process.
Here is a link to some great information about short sales.
Tabai & Schulze Team
NP Dodge Real Estate
Example: Home sales price $350,000
Mortgage mount $400,000
******Short sale of $50,000....