Foreclosure and Short Sale Listings

Put simply, a foreclosure occurs when a homeowner neglects to make their mortgage payments and forfeits their rights to the property. After missing a certain number of payments, public notice is given and a pre-foreclosure period begins. During this period, the borrower can either pay the outstanding amount owed or try to make other arrangements with the lender. One common solution is a short sale, where the lender agrees to sell the property on the open market for less than what is owed in order to avoid actual foreclosure. The bank is thus “shorted” the difference between the remaining mortgage amount and the sales price. If a short sale is not possible, then the lender will attempt to sell at a public auction to a third party. If unsold, the lender will take possession, usually listing the house on the open market with a Realtor.

While foreclosed homes can often be a bargain, there are definitely drawbacks to consider. First, there is often very little room for price negotiations. Secondly, the home will come in as is condition, delegating all necessary repair costs to the purchaser. This also means that help with closing costs will be virtually nonexistent. As with foreclosures, in short sale situations, the key element to remember is that it is not the former homeowner who will be accepting and negotiating the terms of the purchase, but the lender. This can make the entire purchase a lengthy process, with banks notoriously dragging out the process for sometimes months.

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