Real Estate is a great way to build up your net worth, particularly if you buy a house for the price of a car. We at MY SMART COUSIN specialize in helping investors, particularly Black and Brown folks and women, with this process so that you can get started on your investing journey, experience homeownership, and begin building real wealth!
If you’re looking to buy a house, one of the first channels you may want to consider is short-sale homes. Short sales, as well as foreclosures, can be a great way to get a good deal on properties that are usually below the radar of most buyers. But finding them can be tricky—especially if you’re not familiar with the process. That’s why we’ve put together this guide on how to find short-sale homes and foreclosures in 5 simple steps. So read on and start shopping!
WHAT ARE SHORT-SALE HOMES AND HOW DOES THE PROCESS WORK?
A short sale is when a homeowner sells their house for less than what is owed on the mortgage. These homes are sometimes referred to as underwater or upside down. The reason is that the value of the house has dropped to a level that is below the amount of the remaining mortgage amount, meaning you’re essentially paying more to the bank than the house is worth. To be approved to get out of your mortgage and sell your home through a short sale, the homeowner must prove that they are experiencing financial hardship and that selling the home is in the best interest of all parties involved.
Once the homeowner is approved to sell the home through a short sale, they will work with a real estate agent to find a buyer for the property. The proceeds from the sale will go towards paying off the outstanding mortgage balance, and any remaining debt will be forgiven. While a short sale can be a stressful and time-consuming process for homeowners, it can be an excellent way for them to avoid the foreclosure process and get out from under an upside-down mortgage.
THE BENEFITS OF BUYING A SHORT-SALE HOME
A short sale is when a homeowner sells their home for less than the outstanding balance on their mortgage. While this may seem like a lose-lose situation for both the bank and the homeowner, there are a few benefits to buying a short-sale home from the point of view of a buyer.
· One advantage is that you can often get a large discount on the purchase price. Both the homeowner and the bank holding the mortgage are anxious to get the house off their books. As such, the sales price is usually much lower than the price for comparable properties.
· Second is that short sales have fewer interested buyers because the process can stretch out over months before a sale is approved. The pool of buyers who are able and willing to tie up their time and investment capital on a property that may or may not sell is usually quite small.
· Finally, because the homeowner continues to live in the house until the short sale is finalized, you essentially have a live-in property manager who is providing some level of minor maintenance and upkeep on the property.
So, if you’re looking for a deal on investment property, keep an eye out for short sales in your area.
THE RISKS ASSOCIATED WITH BUYING A SHORT-SALE HOME
In a short sale, the lender agrees to accept less than the full amount owed to avoid foreclosing on the property. While a short sale can be a great way to get a good deal on a home, there are also some risks to be aware of.
· One risk is that the approval process for a short sale is entirely up to the lender. The seller may say that the sale is approved, only to have the lender later deny the request. This can lead to lengthy delays, and in some cases, the deal may fall through entirely.
· Another risk is that repairs may not be covered by the seller. With a traditional sale, the seller is typically responsible for making any necessary repairs before closing. However, with a short sale, the repairs are often the responsibility of the buyer. This can add considerable costs to the purchase price of the home.
As such, it is important to be aware of these risks before buying a short-sale property.
HOW TO FIND SHORT-SALE HOMES IN YOUR AREA
It’s no secret that the real estate market has been hot and a seller’s market in recent years. However, there are still plenty of great deals to be had if you know where to look. Here are a few tips on how to find short sale and foreclosure properties:
· Look for a real estate agent who specializes in short sales. This person will have access to a list of properties that are currently in the process of being sold for less than what is owed to them.
· Pay attention to off-book listings through Facebook groups. These are often used to advertise short-sale homes and foreclosures. You can also ask your real estate agent to keep you updated on any new listings that come onto the market.
· Drive around neighborhoods that you’re interested in and look for homes that appear to be in disrepair. These may be short-sale or foreclosure properties.
· Once you have found a few potential properties that you are interested in, it is important to do your research. This includes finding out as much as you can about the property itself, as well as the surrounding neighborhood. In addition, it is important to research the stage of the foreclosure or short sale process that each property is in.
· Attend local foreclosure auctions. This is where banks sell off properties that have been repossessed due to delinquent payments.
FINAL THOUGHTS
YOU CAN ALSO READ: BUY A HOUSE FOR THE PRICE OF A CAR IN THE RECESSION
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