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Buying Foreclosed, Short Sale, and Distressed Properties

Distressed properties are homes that are in danger of facing foreclosure proceedings, or that have already been scheduled for sale as a result of default on the part of the homeowner. A property is said to be distressed when a homeowner gets behind on mortgage payments or a tax payment and the lender or appropriate debt collector begins to start the necessary proceedings to sell the home in order to collect the outstanding debt. The process of buying a distressed property can last anywhere from a few weeks to a year.

However, if you understand the potential pitfalls of purchasing a distressed property - and work with an agent who has a thorough knowledge of this market - you can get a great home at a great price potentially building instant equity.

Karen Arbutine & Associates with RE/MAX have extensive knowledge and experience in the buying and selling process of distressed homes. They can guide you through the process and help you locate and purchase just the right home.

With interest rates at and all time low there has never been a better time to purchase a home - distressed property or not. There are plenty of bargains to be found. Plus U.S. tax credit of up to $8,000 for first-time buyers which was recently extended for buyers who sign a contract by April 30th 2010 (and who close by the end of June 2010) makes purchasing a home even more attractive.

Is a distressed property for you?

Advantages of Buying a Distressed Property

First, you'll be dealing with a highly motivated seller – either a bank in the case of a foreclosure, or in a short sale, sellers who are in financial trouble and very interested in getting out of a mortgage they can no longer afford.

These types of sales take much of the emotion out of the process. You won't be insulting anybody, for instance, if you make an offer that's lower than the asking price. (That's not to say that the low offer will necessarily be accepted, of course.)

Lenders are extremely interested in getting these homes sold and off the liability side of their balance sheets. Many foreclosed properties can be purchased for less than what they would have commanded five years ago. However, you should strike while the iron is hot. Recently bidding wars have been taking place over homes that are moderately priced and in desired neighborhoods. Karen Arbutine & Associates can help you to come up with a reasonable strategy for making an offer.

If you're looking at short sales, you're not likely to get as good of a deal than you would on foreclosures. But there are definite advantages to purchasing one of these homes. For one thing, since the homeowners want to get the home sold quickly, they are likely to keep it well-maintained and in good move-in condition.

Disadvantages of Purchasing a Distressed Property

If you're looking for a "steal," you're probably not going to find it. The market is heating up, with more and more buyers jumping into the market. If you're purchasing a home to live in, you'll often be competing not only against buyers similar to yourself, but against investors. More competition inevitably leads to higher prices.

The transaction process for short sales or foreclosures often takes longer than for traditional transactions. It's sometimes not clear which lending institution actually owns a mortgage loan, and it can take time to get it all sorted out – especially if there's a second mortgage involved, which is often the case.

Some foreclosed properties are also in rough condition. Many have sat idle for a long time with minimal or no maintenance. The departing owners may have sold off fixtures, or damaged the property.

Purchasing Tips

It's critical to have the home professionally inspected before you make an offer or put down earnest money. The inspector will assess the structure's soundness and may uncover problems that would be very costly to repair. Banks usually sell foreclosed homes as-is, meaning they won't make any allowances for repair. And even in a short sale, they likely won't make any such allowances, because they're already losing money on the transaction. You might also consider hiring an appraiser who can tell you what the house is worth.

You should have your financing in order before pursuing a foreclosure purchase. Pre-approved buyers have the best chance of getting the property in case of multiple offers. Also, banks generally aren't interested in contingencies (for instance, needing to sell your current home before purchasing another).

To guide you through the process - from obtaining a loan to identifying a home, to negotiating with the sellers (whether homeowners or banks), to closing - contact Karen Arbutine & Associates today.

Distressed Properties and FHA Loans

If you're a first-time homebuyer, a federally insured FHA (Federal Housing Administration) loan might be a good option. The FHA has a program to help you repair a fixer-upper. You can get one loan that combines the mortgage with the repair costs. The amount of the loan is based on the projected value of the property once repairs are made.

FHA loans only require a 3.5 percent down payment – compared to 20 percent with conventional loans – and the down payment can come from an employer, family member or charitable organization. FHA loans also have lower closing costs than conventional mortgages.

Since the federal government insures these loans, you'll get a competitive interest rate and lenders may be willing to give you terms that make it easier to qualify for a loan. If you have less-than-perfect credit, it's easier to obtain an FHA loan than a conventional mortgage.

If you are interested in purchasing distressed properties or short sales, please feel free to begin your search here or contact Karen Arbutine & Associates today at 888.727.7778

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Karen is in the News Again Sold $8M Seminole County Home - Sale Price Breaks Record Click play on the video to the left. As featured on: MSNBC: Sales Price Breaks Record Orlando Sentinel: Record $8 million for Longwood mansion Orlando Business Journal

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You are inquiring about:	Buying Foreclosed, Short Sale, and Distressed Properties Distressed properties are homes that are in danger of facing foreclosure proceedings, or that have already been scheduled for sale as a result of default on the part of the homeowner. A property is said to be distressed when a homeowner gets behind on mortgage payments or a tax payment and the lender or appropriate debt collector begins to start the necessary proceedings to sell the home in order to collect the outstanding debt. The process of buying a distressed property can last anywhere from a few weeks to a year.
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