Purchasing a foreclosure process is just that, a process. If you can get a great deal on a property, it is well-worth ths process you have to go through. You most likely will receive no warranties or representations on the property you are buying, meaning no property disclosures, guarantee of title chain, etc. You may be able to finance the purchase but I would submit a cash offer, and allow yourself to shop for a mortgage and a low interest rate before closing. Typically it will take a couple weeks at least to get response from a lender on an initial offer, sometimes longer. Banks are flooded with people looking to get a great deal by low-balling offers on properties in default. If you have a direct contact at the lender or bank you will have a much easier time getting a response.
Banks and loss mitigation departments are flooded with offers on short sales so you should expect that this will take a while. Never before have there been so many defaults in the United States, and I don’t think even the banks have any type of precedent to refer to in hopes of handling these short sales in an efficient way.
There is also a good chance that they are trying to line up another buyer for the property. It is hard to know exactly what is going on when working in the short sale process. You are guaranteed nothing essentially, and have no reps or warranties on the transfer of the sale. You may however, get a property for far less than its market value. In some areas it is hard to determine where those values will settle. In some cases banks and lenders are having a hard time valuing the assets they have taken as collateral. Stay patient – and it helps having a contact at the Loss Mitigation department if you have worked with the same lender in the past.
Typically as a homeowner, there are only a couple options to rescue a home from the short sale process – either paying the full past-due loan balance, or structuring a loan modification, which banks and lenders are more lenient to put together under the recently initiated Obama stimulus package. One thing to remember is that BANKS DO NOT WANT TO OWN REAL ESTATE. They would much rather use any alternative available – and because they are dealing with a record number of defaulted loans, they are more willing to offer loan modification. Refinance is still possible through many lenders but credit conditions have tightened, so only the most credit-worthy borrowers are able to refinance with good terms in todays market. This leaves a good amount of opportunity for the foreclosure investor, and if you are patient you can buy some great deals at a time when prices are on the decrease.
A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack of), by determining the probable selling price from a ”Broker Price Opinion” BPO or through a valuation of an appraisal. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency.