A short sale is when the current owner lists their property for sale for less than the balance owed on the mortgage. This is sometimes called a "pre-forclosure" property and requires lender approval. Since the sale proceeds go to the lender, they'll have the final say on accepting or rejecting offers.
Buying a house at auction typically requires a cash payment and comes with some risks. Some homes are put up at auction without an appraisal or inspection, so you may not know the property's condition or even its actual market value. If possible, ask to do a walk-through and arrange for a home inspection.
If the auction doesn't result in a sale, the lender will hire a real estate agent to sell it in hopes of recouping what's owed on the mortgage.
The biggest risk is that these homes are sold as-is. The government-owned homes might get structural repairs. However, for the most part, any repairs will fall on the buyer's shoulders.
An experienced real estate agent can help you navigate the hurdles of buying a foreclosed home.
Get your credit in good shape. Banks can be extra cautious about credit issues of potential borrowers looking to purchase a foreclosed home.
You'll want to get preapproved for a home loan from a mortgage professional to verify your income and assets.
Hire a certified home inspector to evaluate the home.
If it's a short sale, your real estate agent will submit an offer to the current homeowner. However, remember that the lien-holder will have the final say. For auctioned homes, contact the trustee or attorney for assistance. If the house is bank-owned, your agent will submit the offer to the bank's agent.
Bank-owned properties take longer to close than buying from an individual. But typically, it takes about 30 – 45 days for the sale to close.
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