Buying your own house is the ultimate American dream. Today, the way the economy is faring, many homeowners are losing their homes to foreclosures or opting for short sale. So there is a surplus of homes available, as these homeowners are unable to keep up with their mortgages and have not been after to refinance their mortgages to hold on to their homes. These homes are flooding the market and are being sold at a lower price. This can make it difficult for you to choose between short sale and bank owned house.
If you understand the difference between the two, you will be able to make a more informed decision when you set out to buy your own house.
A short sale usually takes place when a homeowner is unable to keep up with his mortgage payments and approaches the lender to give permission to sell the house. In such a situation, the lender agrees that the house be sold for an amount that is less than what the house owner owes the bank. The name basically indicates that the sale will be short of the actual amount owed on the house. When the house owner finds a buyer, the sale price has to be first approved by the lender. This can take anywhere from 3 months to 12 months, making it a long and lengthy process. And, there is no guarantee that the bank will approve the price.
When a house owner defaults on a mortgage and the lender cannot give him any more time to catch up and become current on the payments, the house is foreclosed. The ownership of the house goes to the bank and the bank has the right to sell it to recover its losses.
If you are opting for a short sale, make sure you have a lot of patience. You offer would have to be approved by a committed and this can be a long-drawn process. During this period, you would still have to maintain your creditworthiness by making timely payments to your creditors, as this could count in the approval process.
On the other hand, if you decide to buy a house is that owned by a bank, it is very similar to buying a house from a private owner. The good news is such a house will be sold for a lower price than its market value because the bank will be keen on removing it from its books. There will be an asset manager responsible for the sale of the house and this manager has the right to accept or reject offers.
If you are looking to buy a house that is selling at a bargain price and are not willing to wait to become the owner, you should opt for a bank owned house. But remember, such a house is sold as-is, which means you would be responsible for repairs. So make sure you get the house properly inspected, as it should not turn out to be a bad bargain.
If you are looking for a home where the house owner still is involved in the upkeep of the house and do not mind waiting until the bank approves the sale, you should go in for a short sale.
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