When it comes to real estate transactions, home sales typically fall into one of three primary categories: traditional sales, short sales, and foreclosures. Each of these categories presents its own set of advantages and disadvantages for buyers. Generally, short sales and foreclosures offer more affordable properties, but buyers should be aware that the lower prices are often reflective of certain underlying issues. The most suitable option for you will depend on your financial circumstances and objectives, particularly whether you intend to live in the property or use it as an investment. Let’s compare traditional sales with short sales and foreclosures in Tennessee.
Traditional Sales
This is what first comes to mind for most of us. Traditional sales involve a seller and a buyer who agree to sell/purchase the property for a specific agreed-upon price. Although there may be circumstances causing the seller to sell, she is not being forced into it by a lending institution, as is the case with short sales and foreclosures in Tennessee.
Short Sales
When it comes to short sales, the sale proceeds are insufficient to settle the outstanding property debt, giving rise to the term “short.” The process involves the seller obtaining approval from the lender on the sale price, leading to considerable time investment. Despite the extended timeline, a short sale serves as a foreclosure avoidance strategy for the seller. Buyers with patience in waiting for the offer approval can benefit from attractive deals through short sales.
Foreclosures
When a homeowner falls behind on mortgage payments, the lender may initiate a foreclosure process by issuing a formal notice. This notice informs the homeowner that the property will be foreclosed upon if payments are not brought up to date or if a suitable payment arrangement is not established within 90 days. Subsequently, the property may be auctioned off to interested individuals or companies, usually starting at a predetermined minimum bid. Oftentimes, the lender ends up reclaiming the property with the intention of selling it to recover the outstanding debt.
Foreclosure properties can present lucrative opportunities for buyers seeking favorable deals, although navigating the intricacies of such transactions can be overwhelming. Unfortunately, these situations can turn unpleasant as homeowners are compelled to part with their properties. Circumstances leading to foreclosure sales are often beyond the homeowners’ control, such as unforeseen medical issues, job loss, or divorce.
Foreclosure can be painful for the homeowner, but good news for the deal-hunting buyer. The bright spot for sellers is that they can exclude canceled debt from their income tax returns, and they no longer have to make mortgage payments. The entire process can take several months, and the house is theirs until everything is finalized.
Observations About Short Sales and Foreclosures
Short sales in Tennessee typically take a lot longer to close than traditional sales, requiring complex documentation and extended back-and-forth between the seller and lender. If you make an offer on a short sale, it not only has to be accepted by the seller but also has to be submitted to and approved by the lender (who is taking a loss). If your offer isn’t approved, then you’ll have to restart the whole process. As a result, short sales usually take three to six months to complete while foreclosures usually close within 30 to 45days of an offer’s being accepted.
Another important aspect to keep in mind is that short sale and foreclosure properties are often vacant for long periods and frequently in disrepair. In addition, these properties almost always must be purchased as-is. The good news here for buyers is that if you’re willing to invest a little in repairs and put in a little elbow grease, you can get a great deal on these properties.
Traditional sales vs. short sales and foreclosures in Tennessee – which one is right for you? Again, it depends primarily on your purpose in buying the property, what you intend to do with it. It also depends on whether you’re willing to play the waiting game and are prepared to take on a distressed property. In such a situation, it’s best to lean on the expertise of a qualified real estate professional. And we’re prepared to provide the guidance you may need. Call us today at 423-331-6110!