The Dilemma: Short Sale Vs Foreclosure
Buying a new home can be an exciting experience. You get a fresh start in a new area. Plus, you get the added benefit of being able to decorate a house from top to bottom. The deal is only sweetened if you can save some money by investing in a foreclosure or short sale property
. Knowing which one to buya short sale or a foreclosurecan be confusing, though.
So, which is better: a short sale or a foreclosure? Each offers alluring advantages, but some of the disadvantages of each might put you off. Here are the benefits and drawbacks of both a foreclosure and a short sale
, so you can decide for yourself which option is right for you.
People looking for a quality home for a low price will love short sales
. With a short sale, the owner owes more on the home than the home is worth and does not have the financial ability to repay the loan. In order for a short sale to go through, the homeowner has to put the home on the market, find an interested buyer at a price that the lender will approve of, and the lender has to agree.
Unfortunately, the channels that the sale has to go through make it an extremely time consuming process
. Along with the normal negotiations between buyer and seller, a short sale must also go through a lengthy approval process from the original mortgage lender. This process can take anywhere from a few weeks to months at a time, depending on if the paperwork was filed correctly and on the lending agency.
That being said, if you are in a rush to move into a new home, then a short sale is definitely not right for you. Closing the deal quickly is highly unlikely for short sales. But, if youre willing to wait out the deal, a short sale could be right for you
SEE ALSO: Short Sale Essentials
For those looking for a quick, cheap sale, a foreclosure is a great option. Foreclosure sales are a lot faster than short sales because the lender is on board already
. A foreclosed home is one in which the borrower has missed too many payments and has been evicted from his or her home. So, you are dealing with the lender, who wants to turn a profit as fast as possible on the property.
The issue with foreclosures is that the process is almost too fast. If you do not properly research a foreclosed home, you could be investing in a subpar piece of real estate
. Buying a foreclosed home at an auction is not a good idea because you will not be able to see the home and evaluate its flaws. Plus, there is the added pressure of an auction setting. You can make bids, but you cannot negotiate the price lower than what the auctioneer is offering. Before making an offer on a foreclosure property, it is important to fully research it.
Another issue with foreclosures is that you buy the property as is. That not only means that you have to accept the homemold and allbut also that any liens or other debts attached to the property are now yours to pay. Such debts arent always revealed at the time of purchase, so you might not know what youre getting into before you buy. Make sure that you have title insurance
before you buy and you will be protected from this sticky financial situation.
SEE ALSO: The Foreclosure Timeline
The dilemma of short sale vs foreclosure is not easily solvable. It truly depends on your own requirements for the house, what is available in your area, and how quickly youll want your new house. But, with enough research and a little bit of luck, you can find the home of your dreams
for a price you can afford.