Short Sales, Foreclosures and Regular Sales

As a buyer, what do you need to know about the differences between regular sales, foreclosures and short sales? Each has its advantages and challenges. This posting will discuss just a few of the differences between the properties and why one may be better choice for you than another.

Offers placed with regular sales of non-distressed properties tend to move the fastest. An owner is presented with the offer and makes a yes/no decision immediately. This sale allows for a bit of negotiating on terms or price. However, sometimes sellers have an unrealistic expectation of the value of their home and this factor can sometimes create a impasse in the negotiating. If a buyer needs to get a purchase a price within a restricted time frame with controllable parameters, the regular sale may be a better choice when looking at properties.

When sale price is the over-riding concern, a foreclosure may be the best route. However, foreclosures are set up for bidding, not negotiating. So buyer needs to put forth his/her best offer up front. For the early part of 2010, most properties under $75K have been in a price war, verse and low bid type scenerio. For a cost conscious buyer a foreclosure may be a good purchase. However, there is typically a lot of handyman work required. The time and build out costs of bringing that property up to standard may in the long run cost more than if you purchase a regular sale. Many foreclosures are not allowing financing or even inspection periods. All these elements factor into the buyers decision.

Short sales are the nemesis of realtors. Closing can take up to a year--if it closes at all. Parameters are dictated by the bank and buyers are at the mercy of everyone else. But with the price wars happening in the foreclosure market, the short sale may be the best deal. Often short sales have the owners living in the property, so the property may be difficult to show and deter less patient buyers from considering it. Be forewarned that short sales are a very long roller coaster ride. Banks are trying to expedite the short sale process, but there are still lots of delays and frustrations. The property could devalue over the life of the short sale closing which may make a buyer's offer a bit high at the end. However if the price increases in value, the bank will try to renegotiate the property before closing (always higher, never lower!)

Ask your realtor to clarify the differences to you and which would be best for you to consider in your unique situation.