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Short Sales and Foreclosures Offer Great Deals for Patient Homebuyers

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By : Jamie Mathwig    99 or more times read
Glut of Short Sales and Foreclosures = Great Deals for Patient Homebuyers

Short Sales and foreclosures are reaching record levels in the U.S. as many homeowners are feeling the squeeze from the recent recession. Whether the reason for having to give up their home is related to job loss and not being able to make the mortgage payments, or the homeowner simply realizing their property is worth far less than they owe on the mortgage and walking away (strategic default), the end result is the same; there are some great deals coming on the market!!

Foreclosure numbers have gone up 16% in the first quarter compared to '09 figures and, according to the Mortgage Bankers Association there approximately 5-7 million properties currently eligible for bank repossession. For many, this spells doom and gloom, but for the fortunate (or lucky) portion of the population who are less affected by the economic slump, this spells opportunity.

Although the deals are great, purchasing a property that has been foreclosed upon is not as straightforward as buying a regular home. The biggest difference being the time it takes to close the deal. Buying a home from a lending institution is usually frustrating and time consuming, sometimes taking upwards of a year to complete the sale. Once the decision has been made to purchase a new home, most people would like to get the deal done and be moved in as soon as possible. If considering purchasing a foreclosure or short sale, you better have a lot of patience. The reason for the time delays is the increasing numbers of foreclosures the banks are processing, leaving Realtors across the country complaining that lenders are often difficult to reach, and sometimes only communicating by infrequent e-mails.

There is some good news for those considering purchasing a short sale property. A short sale occurs when the lending institution agrees to let the home sell for less than the loan amount. This process is much faster and less costly for the bank, and saves the homeowner from having their property foreclosed upon. Traditionally a short sale would still take a considerable amount of time to complete; however, the Obama administration has implemented new policy that should improve this situation.

A new program has been put in place to help accelerate short sales and Mark Zandi, Chief Economist at Moody's Analytics, predicts 350,000 homeowners will take part in the program over the next couple of years. The program provides the homeowner with cash incentives for moving expenses, encouraging them to choose this option over just walking away from their home. Another component to this program is that mortgage companies will have to set a minimum price before the house is listed. This will speed up the process considerably compared to the past when lenders would not begin calculating what they would take until they had an offer in hand.

So, if you have the resources and the patience to buy a foreclosure or a short sale you will definitely (and sadly) have plenty of great deals to choose from and hopefully, with the new policies in place, the process will not be as trying as it has been in the past.
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