| Buyers are going to find some extraordinary | | | | the local MLS); |
| garage-sale priced homes in this market as banks | | | | 5. Find out the exact mortgage balance and the status |
| foreclose on some homes in the area, but long before | | | | of the default or foreclosure; |
| the Trustee's Sale there will opportunities to buy | | | | 6. Find out if there is a second or third mortgage (trap |
| homes through a process called the "short sale." | | | | for the unwary); |
| What is a short sale? A short sale is the sale of a | | | | 7. Find out if there are other liens (tax liens, mechanic's |
| home that is in foreclosure at a price less than the | | | | lien, labor lien, state liens, etc.) |
| existing balance of the mortgage, which can only | | | | 8. Know how to talk to the loss mitigation department |
| occur with the full cooperation of the bank holding the | | | | of the mortgage holder (not always a bank); |
| mortgage. The process is very involved, and frankly, it | | | | 9. Beware that purchasing a home in a short sale, |
| is a rare event, or at least it has been. We will | | | | which is before a formal foreclosure takes place, does |
| undoubtedly see more short sales in the coming year. | | | | not wipe out any subordinate loans or liens; |
| The legal and procedural traps for the unwary are so | | | | 10. You need to know which costs and fees, in addition |
| significant that I would not recommend that a buyer try | | | | to the mortgage balance, can be compromised and by |
| to purchase a home through a short sale without the | | | | how much (this is learned from experience); |
| professional help of an experienced person. By the | | | | 11. Put together a comprehensive package to the |
| way, most attorneys and most real estate agents are | | | | mortgage holder, which is the key to making all this |
| not experienced in this area. Due diligence in finding | | | | happen. This includes the Purchase & Sale |
| someone who can help you is critical to your success. | | | | Agreement, and it includes a thorough analysis of the |
| Let me make the point this way: if you find someone | | | | home, prices, the local market, and justification of the |
| who really knows how to help you purchase a home | | | | offering price (this must be very professional or your |
| out of foreclosure, you will be ahead of the crowd of | | | | offer will be dismissed without serious consideration, |
| buyers, and you may be the only legitimate buyer as | | | | and you must convince the bank they should sell at |
| far as the bank is concerned. | | | | your price to you); |
| Briefly, here is the process: | | | | 12. Follow through with all parties and details is critical to |
| | | | reaching the closing table on a short sale. |
| 1. Find and identify homes that are in default (even | | | | Short sales are difficult and complex. While some |
| before the formal non-judicial foreclosure starts); | | | | get-rich-quick cons are out there preaching that buying |
| 2. Of course, also search for homes that are in | | | | foreclosures is the answer to becoming wealthy, |
| foreclosure with plenty of lead time before the | | | | buyers of foreclosure properties through the short sale |
| Trustee's Sale (you need many weeks and probably a | | | | process are few and far between. Buying foreclosure |
| couple of months to coordinate, so if the Trustee's | | | | properties is not for beginners. It is full of traps for the |
| Sale is around the corner, it is too late to do a short | | | | unwary. |
| sale); | | | | Buying a foreclosure will be one of three experiences: |
| 3. Narrow this short list down to the one you would | | | | 1.) a dead end after months of frustration, 2.) a fast |
| want to buy as your own; | | | | way to lose money because of major mistakes in the |
| 4. Do an accurate CMA (comparative market analysis) | | | | process, or 3.) a great way to pick up a lot of equity |
| using "sold" homes of the same or very similar | | | | immediately at closing because your purchase price is |
| features (you'll need access to a good database, like | | | | below the true current fair market value of the home. |