Caveat Emptor: Buying Short Sales And Foreclosures
Few in the real estate community would disagree with the idea that the two hottest
keywords in todays real estate market are short sales and foreclosures. With interest rates at historic lows and prices that have fallen substantially from their 2007 highs buyers are coming out of the woodwork to find the steals in every neighborhood. For many this means searching for distressed properties namely short sales and foreclosures. Buyers believe that short sales and foreclosures offer the best opportunity to get a great deal but buying these properties requires experience and caution. Many times the condition of these distressed properties is less than desirable and there are two key issues buyers should watch out for.
Property Condition
All short sales and foreclosures begin the same way, with a home owner who can no longer afford to pay his mortgage. If someone cant afford to pay his mortgage and is forced to ask the lender for a short sale it is highly unlikely that this homeowner will have sufficient money for the maintenance and upkeep of his home. Delinquent homeowners can remain in their homes for anywhere from 12-36 months, all the while not keeping up with the routine maintenance a house needs. If the short sale is unsuccessful and the home is foreclosed on it is not uncommon to see the homeowner retaliate by removing appliances or sometimes even severely damaging the home. When buying any kind of distressed property, make sure to contact a reputable, experienced home inspector and spend some time really evaluating the property. Get a contractor to give written estimates on any work that needs to be done.
Property Occupants
Short sales are typically occupied by the homeowner attempting to effectuate a short sale or by tenants of the homeowner. Homeowners are usually helpful because they have something to gain but tenants may not always be. Often times the tenant is paying rent but the landlord is not paying his mortgage. This can cause tension and even lead to a situation where the tenant becomes a non-paying squatter. Foreclosures are usually not occupied but can occasionally be rented by the lender or occupied by a squatter. When buying short sales and foreclosures, make sure to carefully assess who is currently living in the property and what lease, if any, exists and be prepared to have to evict a non-paying squatter.
Buying distressed real estate is smart but does require expert assistance. Contact a local real estate expert making any final decisions.