Short Sales Properties: The Second Best Deal

With the current status of the real estate market there are great investment opportunities that can be found across the country. However, where do short sales fall? Are there better investment opportunities out there or are short sales your best bet?

According to RealtyTrac, homebuyers are definitely taking advantage of the real estate investment opportunities that short sales provide. In the second quarter, approximately 12% of all homes sold in the United States were short sales, in comparison to 10% in the first quarter. With these numbers, it is apparent that homebuyers are seeking out short sale properties when looking for real estate investment opportunities.

What is a Short Sale and how can Homebuyers Benefit?

Short sales refer to when a home is put on the market and sells for less than the current mortgage on the home. In these situations, lenders are striving to reduce the number of foreclosures and therefore agree to allow the homeowner to sell the property for less money than they owe. As a result, homebuyers can receive approximately a 20% discount on the home by purchasing a short sale property.

Why do Homeowners Consider Short Sales?

In short, to avoid foreclosure. Instead of crushing their credit and losing their home the hard way, they negotiate with their lender and are able to part with their home for less than they owe. As a result, they avoid financial disaster and the lender typically takes the majority of the hit. However, lenders that are struggling to maintain their current foreclosure inventory and therefore are often more than willing to consider short sale to relieve their foreclosure inventory burden.

Foreclosures: The Better Option

Although short sales are excellent investment opportunities, you can often obtain a better deal if you purchase a bank-owned home. In fact, you can get up to 40% of a discount if you purchase a foreclosure home, which compares to the typical 20% that you receive when purchasing a short sale property. Therefore, although short sales provide exceptional discounts on homes across the country, foreclosures can provide up to twice the amount of savings. However, keep in mind that many foreclosure properties are sold “as is” and require minor renovations to achieve a livable standard.

In the end, short sales are on the rise as homeowners strive to avoid foreclosure and homebuyers and investors search for great investment opportunities in the real estate market.