Foreclosure/Short Sale Homes
If a homeowner can’t pay their mortgage, the mortgage trustee can take back ownership for the lender through a process called Foreclosure. The actual foreclosure of a home is the culmination of a long process where the lender (and very possibly the homeowner) attempt and fail to get the loan payments back on track. Once all efforts have failed, the trustee for the lender's mortgage advertises and causes a Foreclosure Auction of the home to take place generally on the County Courthouse steps. Since most lenders bid at the foreclosure auction, and since their bid is generally the outstanding 1st mortgage value, these days the lender is the most likely winning bidder at the foreclosure auction. Bidding the 1st mortgage value can stall the need for the lender to devalue the net worth of their mortgage/home as an asset.
Some owners, seeing the foreclosure wolf at the door, take action themselves and attempt to sell their home (prior to it's foreclosure) for less that the mortgage value(s) in a process called a Short Sale. Once the seller accepts a sale contract, they then attempt to convince their existing lender that approving the sale is a better deal for the existing lender than proceeding to foreclosure. As you would imagine, if the property has a 1st and 2nd mortgage, it's more difficult to navigate to a satisfactory conclusion. Consequently, you see the term 'Subject to 3rd party approval' in the MLS listing information. Generally, the big bone of contention between the seller and his lender is the issue of whether or not the lender will forgive the difference between the amount owed on the mortgage(s) and the net proceeds of the sale.
Short Sale buyers should plan on the overall purchase process taking 3 to 4 months in duration. Once we get under contract with the seller, the process halts until the owner convinces the Short Sale Mortgage company to accept less than the overall amount currently owed. This is referred to above as 3rd Party Approval. Obtaining approval can take between 2 and 5 months. Once we have approval, the purchase process re-starts and generally moves to a conclusion in about a month. So ... Purchasing a short sale requires a patient buyer who has a flexible living situation while we wait for 3rd Party Approval. Generally, these buyers are rewarded with a better price than they might obtain if the home went through foreclosure and a home which has been under the owner's care while waiting through the process.
Foreclosures ... Generally most so-called 'foreclosure sales' actually involve the Re-Sale or Post-Foreclosure sale of previously foreclosed home by the now owner lender and are more correctly identified as Bank Owned or Real Estate Owned (REO) property sales. The terms become even more confusing when the sales method for these Bank Owned properties is an Auction of Foreclosed Homes.
Foreclosure Re-Sales ... These days, because many of the homes being foreclosed on didn't involve any form of mortgage insurance (PMI, MMI or VA) most advertised foreclosure resales involve 'bank owned' properties ... The lenders themselves have purchased the homes at court ordered foreclosure sales and are now attempting to resell the homes and minimize their losses.
Up through the late '90's, the Federal Government was a major player in many foreclosure resales. It’s programs helped people buy homes with low down payments sponsored by HUD’s Federal Housing Administration (FHA) and the Veterans Administration VA. When one of these loans goes sour, HUD or VA takes title to the home and sells it as a foreclosure.
HUD/VA Sales ... HUD and the VA run very visible foreclosure sale programs. They require that you to use a Realtor to see the homes and to place a competitive bid for the homes. HUD and VA advertise their foreclosure homes on the Internet. You can access their WEB Sites by clicking the link at the bottom of this page.
Both HUD and VA pay my commission as a part of the sale price and follow a practice of giving priority to prospective owner occupants. But, they also offer some homes to investors. Getting started is easy …You need to take action on four fronts.
First … You should align yourself with a Realtor . We can meet, discuss Foreclosures, the home you’re looking for, the services I provide and agree on how we’ll work together
Second … You need to get started down the path for a home loan. When we find a home you want, you’ll need financing to be able to bid. I can help you plug into the best sources of financing for your situation.
Lastly … You’ll want to spend some time checking out neighborhoods and inspecting a few foreclosure resale homes. That way you’ll have a sense of value and become familiar with areas and models that look interesting to you. I’ve got a system which can feed you information on a continuous stream of homes. I’ll make it possible for you to look at your own pace and not have to worry about missing out on the homes that you’d want to buy.
So ... Let's get started ... Give me a call or email and I'll be happy to get together with you and 'kick-off' the process.
ERA Teachers, Inc. 555 Grove
Street, Herndon, VA 20170