Part of finding a great deal is looking at properties that are in "pre-foreclosure". Our market is flooded with homes in this status. Some are owner occupied, many are vacant. At this stage in the foreclosure process that lender do not have legal possession rights to the property. However they will consider a short sale. A short sale is defined as a sale where the price is less that the value of the mortgage(s). The borrower has to agree to sell, sign all purchase and sale agreements allow a third party to represent them in the short sale negotiations. Although the property is being sold by the borrower, the lender must approve the sale.
Although many properties are offered at 50-70% of assessed value, getting the lenders to process the short sale request and negotiate a sale price may take months. The real estate investor expects this delay, the average home buyer does not. The deals are great but the pain of getting the deal can be also great.
Just because a home is listed at a price on the MLS is no guarantee that the lender will approve it. Allowing the home to go to auction is always a viable option for lenders. Many times the property will not be purchased at auction because the opening bid was set too high or no one was willing to make an acceptable bid. The property then goes back to the lender and is officially foreclosed. The lender then assigns the property to a Realtor who lists it on the MLS and offers it for sale in a traditional sales model. REO (Real Estate Owned) properties also offer exceptional value to both the investor and the first time home buyer.
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