As banks continue to foreclose on homes in Wisconsin, buyers are sure to come across some amazing garage-sale priced homes; but buyers have opportunities to buy homes through a "short sale" before a home goes into foreclosure.
What is a "short sale?" A short sale may be defined as the sale of a home at a price less than the existing mortgage balance; however the ultimate price of a short sale lies in the willingness of the bank to negotiate terms. A Short Sale is a complicated process; and quite a rare occurrence until now. Without a doubt, short sales transactions are becoming common and will continue to be prevalent over the course of the next year.
It is good advice to consider hiring professional help when you are looking to buy a home. Look for a Realtor who specializes in distressed properties and specifically certified in the short sale process. A short sale transaction is a specialty field, so you choice of representation should be carefully considered. Be aware of the numerous legal loop holes that can cause the average person could be taken advantage of.
It is very important to realize that the majority of lawyers and real estate agents have little experience with these transactions. In order to be successful, you need to be selective in choosing the professional who will assist you in the process. Keep in mind; the most important consideration is by NOT seeking the expertise of a specialists and going it alone (if not fluent in dealing with pre-foreclosures and bank procedures), you will significantly increase your chance of failure at the bank.
The following 12 steps are a guide, but please consider seeking out the help of a professional who specializes in Foreclosures and Short Sales:
1. Locate homes which are in default, as early as possible, even possibly before the formal non-judicial foreclosure begins.
2. Search foreclosed homes with plenty of lead time before the Trustee's Sale (you may need weeks or months of lead time.)
3. Once you have created a list of such homes, narrow that list to only those homes you would likely purchase for yourself.
4. Complete an accurate Comparative Market Analysis (CMA) using sold homes with similar features, via a good database such as the local MLS.
5. Determine the exact mortgage balance and status of default or foreclosure.
6. Research to find out if there is a second or third mortgage on the house.
7. Research the possibility of other liens (tax liens, mechanic's liens, labor liens, state liens, etc.)
8. Determine how best to talk and negotiate with the loss mitigation department of the bank or mortgage holder (email, fax, phone, etc)
9. Determine whether or not purchasing via the short sale will negate any subordinate loans or liens (another trap for the unwary.)
10. Know which costs and fees in addition to the mortgage balance can be compromised and by how much (experience is the best teacher.)
11. Prepare a comprehensive package to present to the mortgage holder, which is the most critical step in closing a short sale. This should include the Purchase & Sale Agreement, and a thorough analysis of the home, prices, the local market, and justification of your offering price. Your offer must be prepared very professionally or the bank will merely overlook you, without giving your offer a second look. You have to be able to make a case to the bank, as to why they should sell to you at this price.
12. In order to close on a deal in a short sale, you must follow through with all parties involved.
The complexity and difficulty of closing short sales should never be underestimated, even under the best of circumstances. It is hard to find a buyer of foreclosure properties through the short sale process, despite what con artists would like you to believe. You should have some experience before purchasing foreclosure properties; The reckless need to be aware of entrapment.
Buying a foreclosure may be a fast way to lose money if in the process you make major mistakes. On the other hand, because the purchase price is below the current market value of the home, it can be a great way to pick up equity immediately the day of closing. Many people have also come to a dead end with this process after months of frustration.
There are many great people who specialize in the Foreclosure and Short Sale properties. Just please, please do your homework before going it alone. If you are thinking of doing this, please contact me and I will be more than happy to put you in contact with one of my preferred Real Estate Agents that specialize in short sales.
I hope you have found this information helpful, as that is my goal. In closing, if you need help putting together a plan for financing and/or would like to review the various options available to, please feel free to either give me a call, or shoot me an email. I provide this to you as a service and there is never an obligation..... The Sun is shinning . . . Make it a great day....!
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