Home Buying in 33418>Question Details

Claudia, Home Buyer in Palm Beach Gardens, FL

What's the different risk for a buyer between a short sale and a foreclosure?

Asked by Claudia, Palm Beach Gardens, FL Sun Jan 23, 2011

1. How can I check the documents on buying a short sale does not have uncertain titles, such as stated in Bloomberg's (Jan. 20, 2011), article "Home Buyers Are at Risk in Bad Foreclosure Case at Massachusetts Top Court".
2. Does the risk apply both to foreclosures as well as short sales?

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Dear Claudia,
I work for an agency headquartered in Palm Beach Gardens and we have in-house experts on title, mortgages, REO, foreclosures and shortsales. It makes it easier for us agents but also for our buyers & sellers. I recommend that you pick a buyer's agent with resources to guide you through every step of the transaction.

If a deal sounds too good, it probably is. Whether you go for a short sale or foreclosure, issues I've come across lately include removal of plumbing & doorways, severe mold that clearly has been recently painted over or bare concrete floors with recently removed carpets. There are timeline issues for the title agents that even highly qualified title agents can't cover. In some cases, IRS liens are higher than the value of the property.

I 100% agree with the agent who said bankowned homes are the best deal at this time.

Good luck!!
Susanna Malmgren-Grubb, PA
Illustrated Properties
(561) 827-2952
1 vote Thank Flag Link Sun Jan 23, 2011
Claudia,

The main risk for you is your time.

Short sales may not be approved by the bank for a wide variety of reasons.

On the other hand, Foreclosures are owned by the bank and they are ready to get the home sold.

In a recent BLOG I wrote about the seven reasons a short sale may not be approved.

If you work with a skilled agent you may find a loved and well maintained home at or near the price of a foreclosure or short sale.

Hope you find a home that will make you very happy
1 vote Thank Flag Link Sun Jan 23, 2011
Claudia
This article might be of help to you:
The 4 Foreclosure Related Real Estate Opportunties
http://www.trulia.com/blog/lyle_wolf/2010/11/the_4_foreclosu…
0 votes Thank Flag Link Sun Jan 23, 2011
There are so many title issues with short sales unless you like waiting and then finding out that you cannot close because of title issues. Short sales are not easy for a first time buyer. Foreclosures can be not great deal either. The bank is always looking for the highest price they can get very little room to negotiate. I have had too many buyers disappointed with short sales. I just had a closing last week. The buyer was approved for the loan. We could not close on time because of 3 title issues that the bank attorney was finally able to work out. The sale prior to this one was a purchase of a short sale within the year. Too many risks. Foreclosures are not bargain either because once the bank puts the house on it has been vacant, you have not history from a previous owner. You are buying a pig in a poke in my estimation.
0 votes Thank Flag Link Sun Jan 23, 2011
Hi Claudia,

As long as you are not buying at the courthouse foreclosure auction you shouldn't have any issues with the title because you will get title insurance (paid by the seller).

Your best deal will usually be a home that has actually been foreclosed on by the bank and the bank is now selling it. You MUST make your offer the first day it comes on the market so do not wait until the weekend to see a new bank owned listing that fits your criteria.

Hope this helps.

Alma
0 votes Thank Flag Link Sun Jan 23, 2011
I read the article you referenced and it seems to me the risk applies only to foreclosed homes, not short sales. In a short sale the homeowner negotiates with the lender to take less than is owed to settle the debt and sell the home. There is no question of whether the bank has the necessary standing to foreclose since the home never goes to foreclosure. This may be a question better asked of an attorney, but from what I can see the risk is with foreclosure homes and not short sales.
0 votes Thank Flag Link Sun Jan 23, 2011
The issue is time here. In certain markets a short sale is a great thing. But in Southern California, for example, the short sales end up going for market value. If you are going to pay market value, you might as well just save yourself 6 months and skip the short sales.
0 votes Thank Flag Link Sun Jan 23, 2011
As long as you get clear title and owners title policy. You are good to go. The only time you run into problems is when you buy at auction. Auctuons do not provide anything buyer protection.

Always have a qualified title agent or attorney review your policy.

By the way. Get a good agent to guide you.
0 votes Thank Flag Link Sun Jan 23, 2011
if you put an offer on a foreclosure and it is accepted, it is yours as long as you close. With a short sale if yoru offer gets accepted, depending on the experience of the agent and negotiator for the seller it could be 6 weeks or 6 months and it could be denied. With either you want to review all paperwork before signing anything and inspect the house carefully.

Please see my blog for tips on buying a short sale

http://www.trulia.com/blog/scott_godzyk/2010/10/so_you_want_…


Please see my other blog for tips on buying a bank owned home

http://www.trulia.com/blog/scott_godzyk/2008/08/so_you_want_…
0 votes Thank Flag Link Sun Jan 23, 2011
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