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Foreclosure vs short sale vs sheriff sale

 
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tf




 
 
 


Post  Tue, Jun 25 2019, 6:21 am
What’s the difference between foreclosure, short sales and sheriff sale? Why would I want to buy either or neither and what’s the pros and cons of all? I’m a first time home buyer scared to take the plunge and doing this myself. No partner involved.
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PinkFridge




 
 
 


Post  Tue, Jun 25 2019, 7:45 am
AFAIK, the upside is that you get a great deal on the house. The downside is that it's likely to be more rundown and need work.
Are there any real estate agents you can speak to?
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lkwdlady




 
 
 


Post  Tue, Jun 25 2019, 7:54 am
I think a sheriff sale is after a house has foreclosed it goes to a public auction/sheriff sale. You have to bid on the property at the auction.
There are people who are good at this. They can feel out if it’s worth bidding for. They know what to look out for so you don’t end up with a worthless piece of property. It’s worth it to pay a commission of the sale to someone who knows what he’s doing .
You can end up with a house worth $300,000 that you bought for $85,000 at an auction. Or you can end up paying $30,000 for a property but when you go to see it after the auction you are horrified and are now out $30,000 because you will never live there and you will never be able to re-sell it.
Better if you ask someone to take care of this for you.
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Squishy




 
 
 


Post  Tue, Jun 25 2019, 8:40 am
This is a complicated question. You need more information than you can get here to understand titles. I suggest you consult an attorney.

You also didn't post where amother is enabled. You may have gotten horror stories that way.
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Amarante




 
 
 


Post  Tue, Jun 25 2019, 9:36 am
A short sale is when the owner sells for less than the mortgage but WITH the permission of the lender. That means that the purchase price needs to be approved by the lender since the lender is agreeing to accept that amount rather than the full mortgage price.

The down side of a short sale is that you have to wait - perhaps for a long time - for the offer to be approved by the Bank or other lender. But other than that, it's just like a regular real estate transaction.

In terms of a foreclosure, it depends on whether you are actually buying at a foreclosure sale or whether you are just buying a property from the "Bank" which it has foreclosed on.

When you buy at a foreclosure sale, you generally take the property exactly as is with no ability to even go inside. The Bank is making no representations. It is really meant for professionals in some way - I.e. if you are in the business of real estate. But generally no one shows up at the sale and the Bank shows buys it back.

There are also homes that are being sold by the Bank which were in foreclosure. These are more or less regular sales as you have the ability to walk through them and have them inspected. However, often they are are in terrible shape because the previous owners were mad and so they strip the home of anything that can be taken out. Also, since they were in bad financial shape, they probably didn't keep up with maintenance of the home.
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brat_islava




 
 
 


Post  Tue, Jun 25 2019, 9:38 am
In any of your scenarios you need to have a good inspector or know how to check for mold, etc
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Squishy




 
 
 


Post  Tue, Jun 25 2019, 9:41 am
Amarante wrote:
A short sale is when the owner sells for less than the mortgage but WITH the permission of the lender. That means that the purchase price needs to be approved by the lender since the lender is agreeing to accept that amount rather than the full mortgage price.

The down side of a short sale is that you have to wait - perhaps for a long time - for the offer to be approved by the Bank or other lender. But other than that, it's just like a regular real estate transaction.

In terms of a foreclosure, it depends on whether you are actually buying at a foreclosure sale or whether you are just buying a property from the "Bank" which it has foreclosed on.

When you buy at a foreclosure sale, you generally take the property exactly as is with no ability to even go inside. The Bank is making no representations. It is really meant for professionals in some way - I.e. if you are in the business of real estate. But generally no one shows up at the sale and the Bank shows buys it back.

There are also homes that are being sold by the Bank which were in foreclosure. These are more or less regular sales as you have the ability to walk through them and have them inspected. However, often they are are in terrible shape because the previous owners were mad and so they strip the home of anything that can be taken out. Also, since they were in bad financial shape, they probably didn't keep up with maintenance of the home.


You left out problems with titles. OP should consult an attorney.
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Amarante




 
 
 


Post  Tue, Jun 25 2019, 9:47 am
There wouldn't be any problems with title if purchasing through a bank after foreclosure or in a short sale because those are standard real estate transactions as they have an escrow period and one is required to get title insurance - at least in California - so clear title is part of the process and no escrow funds are released.

As I stated, buying at a foreclosure sale is something that is best left to a professional because there are all kinds of potential issues.
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Squishy




 
 
 


Post  Tue, Jun 25 2019, 9:55 am
Amarante wrote:
There wouldn't be any problems with title if purchasing through a bank after foreclosure or in a short sale because those are standard real estate transactions as they have an escrow period and one is required to get title insurance - at least in California - so clear title is part of the process and no escrow funds are released.

As I stated, buying at a foreclosure sale is something that is best left to a professional because there are all kinds of potential issues.


I don't know where tf is located. Where I used to live, 20% of the foreclosures neglected to personally serve the former owners. There was no way to remedy to that necessary step which is why she should consult an attorney.

There is different issues with buying a short sale. Again, an attorney should be consulted.
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srbmom




 
 
 


Post  Tue, Jun 25 2019, 9:59 am
We bought our home as a foreclosure straight from a bank. We were allowed to see the property multiple times and had a thorough inspection done.
We did have issues with the title even though it was through a bank - there was an unsigned document that for some reason took weeks of phone calls to get taken care of.
All in all, we got an amazing deal and aside for the two months of waiting for the one paper, everything else went smoothly.
I would suggest a good real estate broker and either a mortgage broker or lawyer that can hold your own through the process
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Amarante




 
 
 


Post  Tue, Jun 25 2019, 10:02 am
Isn't it normal to get Title Insurance as part of the process in most jurisdictions? If so, the issue of title is irrelevant since the Title Company does due diligence AND insures the purchaser against issues of title.

I don't understand your comment about short sales. This is normal sales with the only difference being how much the seller is potentially on the hook for if there is negative equity. The bank agrees to take the purchase price and therefore the seller doesn't have to pay off the bank for the difference. There would be no title issues that are unique to a short sale. There are tax implications for the seller since the amount "forgiven" by the bank is taxable by the IRS as imputed income

If you are buying home that has been foreclosed but not at a foreclosure sale, one would take all the precautions that one would take when buying a home that didn't have a foreclosure. One would again have the opportunity to inspect and there would be Title Insurance as part of the process which would include the Title Company checking chain of title. This protects the buyer.

It is only purchasing at a foreclosure sale or "at the courthouse steps" where one is taking a property "as is" which might have issues of all kinds.
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srbmom




 
 
 


Post  Tue, Jun 25 2019, 10:10 am
Quote:
Isn't it normal to get Title Insurance as part of the process in most jurisdictions? If so, the issue of title is irrelevant since the Title Company does due diligence AND insures the purchaser against issues of title.

Correct, but we were not able to get title insurance until those certain issues were taken care of. The insurance company will not issue a policy if there are known issues. That's what was holding up our sale. And they weren't the ones that had an interest in doing the work to resolve the issues, I was.
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Amarante




 
 
 


Post  Tue, Jun 25 2019, 10:19 am
srbmom wrote:
Quote:
Isn't it normal to get Title Insurance as part of the process in most jurisdictions? If so, the issue of title is irrelevant since the Title Company does due diligence AND insures the purchaser against issues of title.

Correct, but we were not able to get title insurance until those certain issues were taken care of. The insurance company will not issue a policy if there are known issues. That's what was holding up our sale. And they weren't the ones that had an interest in doing the work to resolve the issues, I was.


That is correct. As part of the purchasing process, one is advised there is an issue with Title and therefore the property can't be insured. But there is no more likely to be title issues with a short sale than with any other sale. If the foreclosed property is purchased from a bank (as it usually is) the Bank would normally have an incentive to get title cleared so the property can get off the books. Banks do NOT want to be in the business of holding property after a foreclosure.

The seller would have a vested interest in clearing title. Most potential buyers would just move on to another property - it would be disappointing but sales fall through during escrow for lots of reasons. It's no different than there being a physical issue with the house.

If you the buyer wanted a specific property so badly and the seller had no interest in clearing title, that's a unique situation. Would you also purchase a property where there were serious physical defects that the seller didn't want to correct or adjust the purchase price to cover costs of repair?
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