Timing also differs: Short sales can take up to one year to close, while foreclosures generally move along much faster because lenders are intent on recovering the money they’re owed. Furthermore, a
short sale is far less damaging to your credit score than foreclosure
.
Do Banks prefer short sales or foreclosure?
Short Sale Pricing
The short sale asking price is usually higher than the pricing at the foreclosure auction — a 19 percent loss of the loan balance for short sales. In contrast, a foreclosure typically nets a 40 percent loss of the loan balance. In this regard,
lenders prefer short sales over foreclosures
.
Which is better to buy a short sale or foreclosure?
Buying a foreclosure typically is faster than buying
a short sale, and an investor can buy a home for rock-bottom dollar. The national average of a foreclosure that needs some work may cost around $107,600, according to Re/Max. The investor could rent out the home or resell it after fixing it up.
Are short sales more profitable than foreclosures?
Generally,
banks lose more money on a short sale than on a foreclosure
, but there are still times when a short sale is a better option. Sometimes the process of foreclosure is more expensive and involved than the bank wants to handle.
Is a short sale better than a foreclosure on your credit report?
In the end, short sales are almost always damaging to your credit, but
they do less harm than foreclosures or bankruptcies
. A short sale might block you from a mortgage on a new home for two years or so, but a foreclosure or bankruptcy could keep you out of the market for as long as seven to 10 years.
Are short sales worth it?
In short, short sales are
a good idea
if you have plenty of time and money. A short sale buyer may get the property at a reduced price, but the property (in all likelihood) has its share of problems — think “fixer-upper” — and the deal needs to go through considerable red tape to make it happen.
Who pays the closing costs on a short sale?
These seller closing costs include things like property transfer fees, realtor commissions and attorney or title company fees. In a short sale transaction on the other hand, the seller’s closing costs are usually paid out
of the money the buyer
brings to the closing.
Why are foreclosures cash only?
Buying your foreclosed property with cash: A
cash purchase means you won’t have monthly loan payments
, and will avoid the interest expense and closing costs involved with financing. You may be able to negotiate a faster closing on your home because you can eliminate the additional time involved in obtaining financing.
Why do short sales get denied?
A short sale is sometimes
denied due to something as simple as the seller being current on paying their mortgage
. The bank’s guidelines might state the bank isn’t allowed to approve a short sale if the mortgage payments aren’t in arrears.
How much should I offer on a bank owned property?
You should probably make your initial bid at a price that’s
at least 20% below the current market price
—perhaps even more if the property you’re bidding on is located in an area with a high incidence of foreclosures. If you can pay for the property and any necessary renovations in cash, you’re in an enviable position.
Do you get any money if your house is foreclosed?
Generally,
the foreclosed borrower is entitled to the extra money
; but, if any junior liens were on the home, like a second mortgage or HELOC, or if a creditor recorded a judgment lien against the property, those parties get the first crack at the funds.
Will bank owned properties pay closing costs?
Most often, the
bank will pay the seller side jurisdictional transaction taxes and property taxes
, however, other seller side closing costs like settlement fees, condo fees, water bills, and optional fees like a termite inspection report may be transferred to the buyer.
Can banks make a profit on a foreclosure?
When your property becomes the subject of foreclosure,
the bank may benefit from a profit surplus after a foreclosure is completed
. For example, imagine your home was worth $300,000 when you purchased it, and you took out a mortgage loan for $225,000.
What is the downside of a short sale on a home?
Disadvantages of a Short Sale
A short sale comes with quite a few catches.
There are more parties involved than
a typical sale making the process complicated and often lengthy. In a traditional home sale, price negotiations happen between the buyer and seller (or their representatives), not the seller’s bank.
How many years does short sale stay on credit?
Because short sales and foreclosures both fall under this umbrella category, most lenders won’t distinguish between the two, and both stay on your credit reports for
seven years
. Here’s how a short sale works: When you sell your house, all proceeds usually go to the lender.
What are the pros and cons of a short sale?
- Short sales can take a long time. …
- They are sold as-is. …
- Make sure the lower price is really worth it. …
- The good deal factor can be influenced by the market conditions. …
- Less competition. …
- Don’t overlook needed repairs. …
- Home inspections are a must.
