It’s not necessary that a house that runs into default has to go for a foreclosure. Some are sold even before the notice of default is prepared. The core reason homebuyers and investors are tempted to purchase short sales and foreclosures is due to their less-than-market-value price. Sometimes, both the seller in default and the interested buyer can successfully close the deal with a profit for both the parities.
But let’s not forget the process is not as simple as it may sound. Foreclosure purchase is often a complex process as the owner has legal rights over the property in foreclosure. So it’s better both the buyer and seller should acquire professional legal advice before going into a contract. Here are some facts you must know about these types of properties.
Seller of Foreclosures
For obvious reasons neither party wants any kind of problem to occur in the course of foreclosure. But for the seller it’s important to know there are some other options available too besides letting the bank seize the property.
- Knowing how to stop the foreclosure helps the owner who wants to keep the property - by using forbearance, reinstatement, repayments plans and mortgage modifications.
- Short sales for the seller simplifies how the title to the buyer could be transferred before the end of the redemption period. The process is done by requesting the lender to agree for a less than the unpaid mortgage balance. However, do note, not all lenders would be willing for the short sale. Applying the perfect negotiation skills for pricing is the key to success.
- Short sale taxes explain how the IRS will handle the foreclosure property or short sale for taxing reasons. Known as debt forgiveness, according to some tax regulations, seller could be obliged for taxes to the government even though the seller might have incurred loss in the sale.
Tips for Buying Foreclosure and Short Sales Homes
It’s a fact not all foreclosures guarantee a profit. To acquire a property from foreclosure, the buyer would be called to create back payments to the lender; pay off all required fees; and clear the loan or make necessary arrangements to sell the property.
- A foreclosure home can be acquired by either from the seller of the property, negotiating for a short sale, or purchasing from the lender after the completion of an auction.
- Purchasing a foreclosure is about capturing a sale of a distressed property which will be featured in the impending auction. The deal entails by negotiating the transaction directly with the seller. Even though the buyer can wait to bid for the home at the auction, but better know about the imposed requirements and regulations in advance.
- Learn about the pitfalls of foreclosures that will describe how the process of buying a distressed property can pose some hindrances and complications and how to counter them.