But it's not for the faint of heart. Distressed home sales are often complicated and sellers have rights when in foreclosure. Both sellers and buyers should seek legal advice before entering into such a contract.
Sellers in Foreclosure
It's all too common for sellers in foreclosure to want to ignore the problem and hope it will go away. Some stick their heads in the sand. But help is available. Sellers in foreclosure have options.
- How to Stop Foreclosure can help sellers keep a home through reinstatement, forbearance, mortgage modifications or repayment plans.
- Short Sales for Sellers clarifies how to transfer title to a buyer before the redemption period ends by persuading the lender to accept less than the unpaid mortgage balance. Not all lenders will accept a short sale, however. This covers what lenders want from sellers. Negotiation is key.
- Foreclosure and Short Sale Taxes discusses how the I.R.S. will treat a foreclosure or short sale for tax purposes. It's called debt forgiveness, and until tax rules change, sellers could owe the government taxes even though sellers lost money on the sale.
Buying Foreclosures & Short Sale Homes
Not all foreclosures and short sales are profitable. To pull a home out of foreclosure, buyers need to make up back payments to the lender, pay all imposed fees and either pay off the loan or make arrangements to sell the property. Few lenders will let a buyer assume an existing obligation.
- Buying Distressed Homes involves three ways to purchase: from the seller in foreclosure, negotiating a short sale or buying from the lender after a public auction. Read this carefully as investors in California cannot be represented by a real estate agent.
- Buying Short Sales details why the process is complicated and can take much longer to close than an ordinary transaction. Not all short sales are profitable, and this article explains why.
- Buying Foreclosures before the home goes to a public auction involves negotiating directly with the seller. Buyers also have the option of bidding on a foreclosure at the public auction, but read the procedures first.
- Drawbacks to Foreclosures talks about the repercussions and inherent problems that are often present when buying a foreclosure. Buyers who bid at public auctions will benefit from getting as much information as possible beforehand.
- Defaults Hit Home Values. Nearby homes will feel the effect, which could pull the market value of a newly purchased short sale or foreclosure even lower. This article goes into detail about how appraisers determine the value in neighborhoods with distressed home sales.
Fixing Up Foreclosures & Short Sale Homes
One way to make money in real estate is to "buy low and sell high." Couple that principle with fixing up the home or improving it, and the amount of profit can be even greater. Besides, many distressed homes fall into disarray and require repairs.
- Repairs Before Resale can boost bottom-line profit. But not all repairs or improvements return 100% of an investment. Read why.
- Top Do It Yourself Mistakes. This article covers 10 common errors home owners make when trying to flip a house. Don't think about buying a foreclosure until you read this.
- Fix-Up and Sell is a five-part series with links at the end of each article to the next. It's a first-hand description involving simple to complex remodeling projects that were completed on five flipper homes.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.