In addition to what others have said, I'll throw in my tips:
1 - Work with someone who has sold short sales and foreclosures before. Short sales especially can be very tricky and complex. I, like others here, have sold both.
2 - Work with a Realtor who is Short Sale and Foreclosure Certified. I am.
3 - With a short sale, ask your Realtor to find out how many lien holders there are. The more there are, the more complicated the deal will be.
4 - Many properties advertised as "short sales", are really not. Only the lender can decide whether they will allow a property to be sold as a short sale. The fact that an owner may owe more than the property is worth only means that the owner is underwater - it does not mean that the property will be allowed to be sold for less than the mortgage balance; again, only the lender can make that decision.
5 - In a "short sale" situation ask you agent if the listing broker has spoken with the bank and has found out that they will accept a short sale and, if possible, what price they would accept.
6 - See if you can find out how much is owed on the mortgage. If you offer that much, plus closing costs, I'd bet the bank would approve. Of course, they would because they're not losing anything; unlike the owner who will lose their equity - which is a shame,b ut better than being foreclosed on.
7 - A bank-owned property (also called an REO or foreclosure property) is easier to deal with because you're working with a corporate entity. They're not insulted by low offers - they just reject them and wait for something better to come along. If your offer is rejected, then just submit another.
The more I write, the more I realize there is to write, so I'll just stop now. I hope these tips help.
There are many good Realtors in Santa Fe with experience in the short sale and foreclosure process. Interview a few and go with whomever you feel is most responsive and comfortable to work with.
The short sale process can be more difficult and frustrating to a buyer because of the time it takes and the lack of communication from the seller side. It is not unusual for a transaction to take 6 months to get from start to finish and during that time receive very little feedback.
It is also important to understand that in a short sale, the purchase price more then likely not been approved by the bank. Often times buyer's will get pulled into what seems like a great deal only to find out months later the bank will not accept the purchase price and they counter back with something much higher then what you want to spend. If you are like me I want meaningful feedback through the entire buying process. I want to know that I'm making progress. You need patience to work a short sale to the end and you have to be ok with the deal not going through because of the price. If you hang in there, you can get yourself a good deal. But I do not recommended pursuing a short sale if you have a small time frame for making a move (within 1 - 3 months).
The bank owned foreclosure process can be much more straight forward. We write up a purchase agreement and submit it to the bank. I typically allow 1 - 2 weeks to hear back from the bank, some are faster then others. There is room to negotiate with the banks in many cases on price. Depending on how aggressively priced it is to begin with, it may be prudent to make a higher offer to avoid someone else picking up the deal. The bank typically does not do the repair work that you would find in a home inspection report and often times sells the property "as is". But everything is negotiable.
I prefer working a buyer through a bank owned deal rather then a short sale primarily because of the feedback problem a short sale tends to create. In a bank owned deal, I can keep my clients in the loop. Short sales on the other hand, its difficult to pull information from the sellers side to pass on to you.
Education is the key before jumping into either of these transactions to assure a successful deal. Please give me a call if you would like to learn more about how I walk clients through the process.
It is also important to know the condition of the property and the value of the property. It may not be a "good deal" just because it is listed as a Short Sale or a Foreclosure. Again, an experienced agent with knowledge of the Santa Fe market will be able to help you in that regard.
Please contact me if I can be of assistance in your search. 505-780-3237
Sotheby's International Realty