Earlier in this blog, we discussed short sales. To take that a step further, let's further define the difference between foreclosure and a short sale home.
When a house is sold for less than what is owed on the mortgage, this is known as a short sale. Short sale homes tend to be in better condition than a foreclosure home since someone is usually still living in a short sale home.
One statistic shows that in a short sale, the mortgage value loses around 19 percent. But on a foreclose home the mortgage value loses around 40 percent.
When a home has been foreclosed, the lender will take the home back and the home will be vacant. Many times the home will need some repairs and sometimes has been vandalized. Some lenders will not lend money on a home that is not considered habitable. Buyers of a foreclosure home have to see past the repairs needed to see the potential of the home, however, they also need to know the potential costs of the needed repairs like: new carpet, paint, necessary handyman work, etc.
Bank owned properties is one of the most common form of foreclosure investments. Bank owned homes have already been through the foreclosure auction with no buyers. This real estate then becomes the property of the bank.
All in all, there are great opportunities to make money on a foreclosure home and usually a potential buyer will hear back sooner from the lender than on a short sale.
Short sales, foreclosures and bank owned homes provide an opportunity for a home buyer.
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