If you are looking to buy homes for the lowest prices possible then considering either a short sale or a foreclosure is likely the best way to go. However, there are some key differences that you should consider before making this choice. Knowing these differences puts you in the best possible position to make a sound and rational financial decision. Before you make the leap into one or both of these markets, you should educate yourself as best as you can on short sale real estate.
When it comes to considering foreclosed properties the biggest perk is that you can purchase them at unbelievably low prices. In most municipalities, they are put up for auction by the local sheriff if the mortgage company does not decide to hire a company to sell it for them. This means that there is a minimum bid set and you and whoever else arrives at the auction can make offers until the highest bidder wins. This often leads to people purchasing homes for a fraction of their actual value.
There are, of course, some downsides to this type of process. The biggest issue that most people are concerned about is that you will not have an opportunity to walk through the home. In most cases, the auction is done blindly. Of course, this keeps the price extremely low due to the risk involved. There is also the risk that there are major structural, electrical or plumbing issues that could add up to tens of thousands of dollars in necessary repairs before the home could be lived in. The level of care taken on the outside of the home can hint to its state inside, but that clearly is not always the case.
A short sale purchase is different and lower risk in many ways. The primary difference is that you will have the ability to have a home inspector evaluate the state of the home, which greatly reduces your overall a risk. Another major difference is that you will be able to finance your purchase through a bank as long as you can get approval. In most cases, you must be able to pay for a foreclosed property in cash, which can be harder to come by. Finally, you are going to pay a considerable amount more for a short sale property than you would for a foreclosed property due to their being less risk. It is still typically much less than the actual value of the property. Banks allow this as it will save them money in lawyer fees as well as the process of liquidating the property on their own.
Knowing the differences between these two options gives you a leg up when it comes to making a choice. Both are legitimate options for those looking to get an amazing deal on a home, but it is crucial to understand the risks involved before you make that choice. The more you know, the better the outcome will likely be.