Steve Lynch

Generally speaking I would rather represent a buyer on a foreclosure than buying a FSBO, (for sale by owner) but you want to proceed with your eyes WIDE OPEN if you buy either. If the competitive marketing analysis shows the foreclosure is a good sound investment, then you are in a money making position or an equity gaining position. The same holds true for a FSBO, BUT...and here's the sticking point:
When buying a foreclosure, the seller is NOT emotionally attached to the property. They are looking to get out for the least amount of bleeding on their side, but it is still a BUSINESS DECISION based on logic and the bank is willing to absorb a loss and can right off the loss. The FOR SALE BY OWNER is being sold by someone wanting as much as possible for their home, who is not an expert on the real estate market in their area (many are not properly informed on the process), is trying to cut expenses (they are tight or cheap) and generally has deferred maintainence on the property (not always the case) and are emotionally tied to the property. This becomes a EMOTIONAL DECISION not based on logic, but on their need to get all they can out of their home and they can get offended when you make an offer to purchase below what they believe the home is worth. There are exceptions to the rule, but another thing you may run into with some FSBO sellers is that they are not only penny pinchers, but some can be ruthless negotiators who thrive on beating the buyer in the contracting process. Make sure you have expert representation of a local Realtor so you know you are getting a good value. On the plus side, I have seen some FSBO's that were very nicely taken care of and with a willing seller, the process has been great for my clients. You need to make sure the seller is realistic on what their price and terms are for the property. FSBO's are probably going to be in better move in condition than the foreclosures as the previous owner on the foreclosure could have done damage to the property or didn't have the funds to maintain the home. Always, always get an Inspection on any property and make sure the structure and mechanicals are in good working order. If not, get a reputable contractor to give you a bid to bring to code or fix properly before you are fully committed to closing on the property. In Texas, it is very common to offer Option Money for a specified time, usually 10 to 15 days that gives you the unrestricted right to terminate the contract for any reason during this time. I would rather put up $100 to $200 to protect my $1,000 to $15,000 earnest money! Be safe and I hope you find a good deal! - Wed May 21 2008, 21:27

Find a Realtor who deals with short sales and is experienced with working with Loss Mitigation departments of the Banks who holds the mortgage. Several times there are more than one mortgage holder. BE AWARE that SHORT SALE does NOT equal SHORT TIME! You will need to have quite a bit of patience as the process is sometimes VERY long and tedious. Even when a negotiator is assigned to a file for short sale or for a pre foreclosure work out, keep in mind these banks have thousands of properties nation wide and relatively few trained people who are handling huge amounts of files, and are very hard to reach. Make sure your Realtor has a strong relationship with a reputable title company that has an aggressive Escrow officer who will work with your agent to stay on top of the Lender. Do not make plans to move out until your agent has verified the proper paperwork and payoffs, settlement statements, etc are at the Title company and ALL parties have signed off on the details of the contract. You can get an extremely good value on a short sale property if you can wait out the process (generally add 60 to 90 days or more to a normal contract) but if you are in a hurry, I would have your Realtor look for a very motivated seller and avoid the drama! - Wed May 21 2008, 21:01

Unfortunately, there are several unscrupulous investors out there who have purchased properties through mortgage scams or fraudulent investor groups. Many of these unethical people had no intention of ever paying the mortgage to begin with and borrowed more than the value of the home and then pocketed the difference. They then find an honest and unsuspecting renter who has no representation and they take advantage of them. I would highly advise you find a reputable Realtor in your area and have them walk you through the process before signing anything. They will make sure your interests are served first, and can advise you of any potential pitfalls and their services to you should be free of charge. Always have competent representation whether it is a seasoned Realtor with several years experience or a trusted real estate attorney. - Wed May 21 2008, 20:52