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Short sales and foreclosures are typically a popular target for those looking for investment property. But is this a wise or a risky move?
There are so many distressed homes on the market -- over 1 million foreclosures and over 500,000 short-sales -- that it would take over two years just to sell off those properties. And, according to RealtyTrac, another 1.4 million homes are expected to become distressed within the next year.
Purchasing a distressed property can be much more cumbersome that a standard home transaction. With a foreclosure or short-sale, the buyes is dealing with several third parties, and each party has their own rules and sales objectives.
A distressed home is often in worse shape because the seller may not have the resources to spruce up the place. In addition, banks are taking more time to process these types of transactions in the wake of the rob-signing problems that plagued the industry in 2010.
Another hurdle to cross is the red tape. Some banks may not actually own the loan anymore because during the housing explosion many loans were sold off to investors. So now there is another entity involved in the process that has their own interests to consider.
There are several up-sides to buying a distressed home. The most obvious advantage is that they are often offered at a much lower price than comparable properties.
Banks usually list a foreclosed home so it will sell quickly. Bidding battles are fairly common with these sales, as many potential buyers will come in over the list price.
Short sale homes are usually not listed too far under value. However, banks may accept bids under market value to avoid a potential forceclosure situation.
These are just a few pros and cons regarding distressed home buying. If you are considering making these types of investment we encourage you to conduct additional research.
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