As you’ve been on the hunt for great deals on houses, you’ve likely heard of short sales, pre-foreclosures, and foreclosures. But what are they? And how can they benefit you?
These types of purchases can be great opportunities for you as a real estate investor or as an agent that is looking to build an investment portfolio. The appeal of buying short sales, pre-foreclosures and foreclosures is that you can secure a property well below market value and wholesale, fix-and-flip or flip to rent the property for a more significant profit.
All three options are appealing to a home buyer that has a DIY streak and doesn’t mind putting in the work. Home buyers can save a bundle and get to style the house to their tastes and lifestyle vs. trying to modify the home to meet their needs.
The confusion sets in because there are more similarities between these categories and it feels like they sort of blend together at times. The big difference between a foreclosure, pre-forclosure and a short sale is that each one is set up based on the homeowner’s situation. Who is selling the home, the terms of the sale, and how it is sold can vary with each.
These differences are what will ultimately determine which is beneficial to you, given your interests and goals for the property. To help you determine which would work best for you, let’s take a look at purchase types.
The similarities and differences between short sales, pre-foreclosures and foreclosures.
|Ability to Inspect Property Prior to Purchase||✔||✔||✖|
|Potential Need to Pay Seller’s Costs & Fees||✔||✔||✖|
|Property Sold As-Is||✔||✔||✔|
|Repairs Should Be Expected||✔||✔||✔|
|Reasonable Time to Close Purchase||✖||✔||✖|
|Bank/Lender Approval Required||✔||✖||✔|
A short sale is when a lender accepts a payoff that is less than what is owed. This helps an owner who is experiencing financial hardship sell the property.
Those who take this route aren’t always behind on payments or at risk of losing their home. Instead, it is typically a preventative measure taken to avoid foreclosure. [Read more…]