I came across a blog posting from Cristina McBreairty, a RE/MAX REALTOR® in Maine about buying distressed properties. I found it a very interesting series that was well researched.  You can read the whole series (starting with part 1) here.

Many of the homes for sale today – as many as half in some markets – fall under the category of “distressed properties.”
These are homes that have either gone through foreclosure or are being marketed as “short sales.” In a short sale, the homeowner can’t afford to maintain the mortgage, but the lender – rather than foreclosing – agrees to the sale of the property for less than the balance of the loan.
These types of sales have different dynamics than traditional sales – with more paperwork, often a longer transaction process and, in some cases, more frustration. For these reasons, many buyers shy away from foreclosures or short sales.
However, if you understand the potential pitfalls of purchasing a distressed property – and work with an agent who has a thorough knowledge of this market – you can get a great home at a great price.
Many agents have been specially trained in working with foreclosures or short sales through the Certified Distressed Property Expert class or a similar course. It is important to work with a CDPE that can guide you through the process and help you locate and purchase just the right home for you.
This is an outstanding time to buy a home – distressed property or not. With historically low interest rates, and a glut of homes on the market in most areas, there are bargains to be found. And the U.S. tax credit of up to $8,000 for first-time buyers – good for a home purchased before Dec. 1, 2009 – makes purchasing a home even more attractive.
Is a distressed property for you? Here are pros and cons of buying one:

She continued to point out that the buyer would be dealing with a highly motivated seller – either a bank in the case of a foreclosure, or in a short sale, sellers.

These types of sales take much of the emotion out of the process. You won’t be insulting anybody, for instance, if you make an offer that’s lower than the asking price. (That’s not to say that the low offer will necessarily be accepted, of course.)

Lenders are extremely interested in getting these homes sold and off the liability side of their balance sheets. Many foreclosed properties can be purchased for only a percentage of what they would have commanded five years ago. (This situation is beginning to change, though; bidding wars are breaking out on some foreclosed properties these days, especially those that are moderately priced. It is important to work with an agent that knows what is going on in this area and will be able to help you arrive at a reasonable strategy for making an offer.)

If you’re looking at a short sale, you’re not likely to get quite as good a deal as on a foreclosure. But there are definite advantages to purchasing one of these homes. For one thing, since the homeowners want to get the home sold quickly, they are likely to keep it well-maintained and in good move-in condition.

 

 

Personally, from the lender’s point of view, I shy away from short sales just due to the amount of time involved in getting the approval from the lender. I have seen short sales drag on for month after month only to be rejected by the bank holding the note. I have recently been told the way to buy a short sale is to make an offer on 20 different  properties and wait to see which one the bank accepts, but that seems like a strange way to do business, but maybe it works. The one thing I know that appears to work, is making sure the listing agent has experience selling short sales. They have been through it and know the ways to get approvals.

I have recently posted on a few programs that are especially helpful in buying foreclosed properties, HomePath, HUD Homes and the Good Neighbor Next Door. Another great way to get that “fixer-upper” financed is through the FHA 203k Streamline program. Overall, I think Cristina has put forth some valuable information for buying distressed properties. The one thing I would point out is that you work with a well experienced Mortgage Advisor that will help you navigate the lending issues that often crop up on a distressed property.

That is where I come in. I am Fred Chamberlin, Senior Mortgage Consultant at Alpine Mortgage Planning, 1200 Executive Pkwy., Eugene OR 97401. I am here to help you with the mortgage loan process. You can reach me at 541-342-7576/541-221-3455 cell or by e-mail. Trust experience to help you with your Eugene/Springfield mortgage questions.