What is a Foreclosure?
Foreclosure is a specific legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

Simply, foreclosure is the process by which a homeowner’s rights to a property are forfeited because of failure to pay the mortgage. If the owner cannot pay off the outstanding debt or sell it via short sale, the property then goes to a foreclosure auction. If the property does not sell at auction, it becomes the property of the lending institution.

Many foreclosures are purchased by investors interested in turning the property into a rental or repairing it and selling it. You’ll be competing against investors for these properties who often are able to offer an all-cash transaction.

If you don’t plan on buying a home with cash, you should arrange a solid pre-approval for a loan with a lender and have liquid cash ready for your deposit and down payment so that when a short sale or foreclosure becomes available you can move quickly.

What is a Short Sale?
A short sale is the sale of your home for an amount less than the amount you still owe on your mortgage. The sale does not have to be to your lender, but your lender has to agree to it. Borrowers choose this option when they cannot afford to continue making monthly mortgage payments and cannot pay the difference between the sale price and the unpaid mortgage amount. However, the borrower is not freed from his obligation to repay the remaining mortgage balance unless the lender agrees. Many lenders require that disadvantaged borrowers provide proof of economic or financial hardship before agreeing to a short sale.

Buying a Foreclosure or Short Sale
If you’re in a hurry and have a definite move-in date that must be met, short sales and foreclosures are probably not your best options. However, if you’re willing to live in a temporary rental while you stay flexible in your search for a home, you may be able to acquire a residence for a below-market rate. Florida Brokers has experience helping buyers with foreclosures and short sales who can help you estimate the timeline and negotiate on your behalf.

Another potential issue with purchasing a foreclosure is the condition of the home. Since the owners have been unable to pay their loan, or possibly the home has been empty while the bank has worked through the foreclosure process, it’s unlikely anyone has maintained the property. You can schedule an information-only home inspection before you buy a foreclosed property. Some foreclosures have been repaired at the lender’s expense, so it’s still possible to find one in good condition.

Issues With Short Sales and Foreclosures:
Maintenance and Cleanliness

• Filth and stench.
• Unpermitted changes.
• No electricity.
• Water damage.
• Way behind on basic maintenance.
• Unfinished upgrades and poor repairs.
• Dead or overgrown yards.
• Personal property left behind.
• Vandalism.
• Broken windows.
• Damage to walls
• Removal of valuable items.
• Poor/subpar location.

Problems With the Purchase
Despite all these potential problems, foreclosures can still be a good deal. If you are willing to fix problems that most people do not want to deal with, you can buy a home at a significant discount. However, you may encounter additional issues when it comes to actually purchasing the property and getting it ready to move in.

Issues With Lenders

• Financing.
• Significant time delays in dealing with the bank that owns the property.
• No seller disclosures.
• Competition between owner-occupants and investors to buy the property.