Buying a Short Sale or Foreclosed Property

Due to the recent market correction, buyers can find homes at more affordable prices than at the height of the market. The foreclosure and short sale markets have also become more prevalent. Buyers interested in purchasing a short sale or foreclosed property are advised to work with a REALTOR® who will help in the step-by-step process.

• A REALTOR® can aid in negotiating with a lender on a price to purchase the property.

• Be prepared to provide proof of income and produce financial documentation in the mortgage pre-approval process. Lending standards now require more time and documentation. 

• If your offer is accepted, there is a good chance the home will be sold "as is," which means home improvements become the buyers' responsibility.

• It is important to obtain a thorough home inspection to assess the condition of the property.

• Be aware that buying a foreclosure or short sale may take more time than a transaction involving a new home or current seller. With third parties involved, such as a bank, lender and any other lien holders, it may take more time to negotiate a price, approve an offer and close on the property. If time is on your side, it will help to exercise patience and full cooperation on your part as the buyer.

The U.S. Department of Housing and Urban Development (HUD) offers a program to finance the costs of rehabilitation and improvements made on the home. Rather than obtain separate mortgages to finance the purchase and rehabilitation of a home, the 203 (k) program offers buyers the opportunity to obtain a single mortgage from a Federal Housing Administration (FHA)-approved lender to finance the purchase and subsequent improvements that may need to be made to occupy the residence.

Read about Andrea and Donald's successful purchase of a foreclosed home in Linden.