Are you looking for a bargain? Are you thinking about buying a foreclosed property, or a property in pre-foreclosure? What about a short sale?
You are not alone - news about the residential real estate market has created a demand for "distressed" properties. This includes homes that may be going through foreclosure, or in danger of getting to that point. It also includes homes that are for sale for less than what is owed to their lender (known as a" short sale"). There are people that would like to purchase these homes because they want to get a bargain, and they believe that there are plenty of them "out there."
Pre-foreclosure
Well, there are plenty of homes in pre-foreclosure - this means the owners have missed at least three months of payments on their mortgage. In Illinois, these people often have up to a year to reconcile the situation before the banks will actually foreclose on the property.
If you want to buy one of these homes (and help the owners avoid foreclosure) it can be very difficult to get good actionable information on the properties. Yes, there are some home owners in this situation that are actively trying to sell their homes before the lenders foreclose on them - but many others are just hoping and praying, I guess.
There are several websites and notices in the newspapers about homes that are in pre-foreclosure. Unfortunately, most of these sources just provide you with an address and maybe the name of a lawyer. I've been on several of these websites (the better ones charge a fee) and in my opinion the information is fairly useless. Part of the problem is that you don't know if the homeowner has resolved the issue (caught up on their payments). You also don't know who to contact for more information, or to make an offer to purchase. There is no information about the home, in terms of the size, number of rooms, etc.
Wouldn't it be much better if there was an easy-to-access database or clearing house with accurate up to date information on these properties? I realize that some of these homeowners don't want tons of potential buyers and real estate agents calling them and invading their privacy...but there must be a better way to get these homes into the hands of people that can actually afford them and take care of them.
Short Sales
Some homes that are in pre-foreclosure are available for sale as short sales in the Multiple Listing Service and other on-line sources (with an asking price that is less than the sellers owe on their mortgage and home equity lines). Please note that although these two conditions often go hand in hand, but it is is not always the case - all short sales are not necessarily in pre-foreclosure, and all properties in pre-foreclosure will not necessarily be short sales.
Short sale properties can be a good value, though anyone that is interested in one of these properties needs to be very persistent and incredibly patient. For these sales to actually be consummated, the lender(s) must approve the agreed upon sale price and all of the terms of the agreement. They also have to review the sellers' financial situation to determine whether or not the seller has the funds to make up all or part of the shortfall (the difference between the amount owed and the agreed upon sale price) themselves.
Many of the lenders are taking as long as THREE MONTHS to make a decision on a short sale. By then the prospective buyers may have found another home they like better, or just walked away from the deal because they are tired of waiting. And the result is that the homeowners need to find another buyer. If the seller is already having financial problems, this can make the situation worse and then the property could end up in foreclosure, though this is not always the case.
We keep hearing about the bail out of the financial industry and how these lenders are having financial problems - if they would take a more proactive role in getting these short sales to close in a timely manner, it would certainly help their situation. It is my understanding that in most situations a foreclosure can be a much more expensive proposition for the lender than a short sale. So why are they dragging their feet on these? I've been told it is because they don't have staff in place to handle the heavy volume of work that is piling up related to short sales and foreclosures. This isn't their primary business, so they don't have the staff. Well, why don't they hire people, even on a temporary basis, to clear up the back log. They would be reducing their losses and giving someone a job - both of these would be good for the economy. I'm not an economist, but this just seems like common sense to me.
Foreclosures
Lastly, there are the homes that have been repossessed by the lenders. Some of these are sold at a public auction. In Illinois, in order to buy a home at one of these auctions you have to be prepared to pay cash AND you don't even get to take a look at the home before you buy it. This can be very risky to the average home buyer. Other lenders work with real estate agents to sell their inventory of foreclosed homes. The auction process could definitely be improved, but that would be an article all by itself (it is based on antiquated rules and laws that pre-date the internet and easy access to data).
And then there are other foreclosed homes that sit for months on end for no reason other than the fact that the current owner (a bank or lender) hasn't taken any steps to try to sell them. Meanwhile these homes sit vacant for months on end and start to develop problems, such as mold, water damage, break-ins, thefts, etc. FREE information available to the public on these homes would help the situation tremendously!
What do you think?
Thanks for reading!
nsk
