Will I get a better deal if I buy a foreclosure or short sale (a short sale is when the lender agrees to accept less than what's owed on the mortgage)? Lots of my clients ask me these questions or some version of them. The short answer is: yes, you can get a good deal by buying a foreclosure. The long answer is that it requires lots of patience and perseverance. Here's a tale of a foreclosure:
My client, Dan, started looking for a condo over a year ago. He was moving to Chicago from Michigan to go to law school, and his father was loaning him the money to buy a condo. He made an offer on a condo in River City, but did not get it. He decided to rent for a year, and contacted me again last spring to start looking again. Dan approached looking for a condo like a job. I had set up several searches for him, and as soon as he saw something he liked, he called me and we went and saw it. He made offers on 2 other foreclosures (in both cases we were in a multiple bid situation) and he didn't get either. We went to see a condo in Bucktown that was in foreclosure, Dan liked it and submitted an offer. We received notification that it was a multiple bid situation, and he revised his offer to $2,000 above list price. I don't think anyone was more surprised than he and I when we were notified that his offer had been accepted! His first question to me was "Did I overpay?", which I think is human nature.
The path to closing was not without pitfalls. The inspection showed that the garden unit in the building (which was also in foreclosure) had significant water damage, the hardwood floors were ruined and there was significant mold on the drywall. There was also an issue with the building's sewage system. In spite of this, he knew he was getting a great deal, and we continued to closing.
A couple of days before closing, we were notified that the taxes on the unit had been sold, and it would take a couple of weeks to redeem them. Four days later we were told that the taxes had not been sold and they wanted us to close the next day. The buyer's attorney was out of town, and the listing agent called to tell me we had to close the next day or the condo would be sold to the buyer holding the backup offer. After several frantic calls and voicemails to the buyer's attorney, the seller’s attorney called off the listing agent and the closing was scheduled for the following week. Dan did close the next week and was delighted with his condo.
The bottom line is he did get a great deal, but it required patience, perseverance and a certain amount of risk tolerance for potential problems. So when my clients ask me about buying foreclosures and short sales, my response is yes, you can get a great deal, but you need to be prepared for a long, bumpy road.
Posted at 12:57PM Nov 20, 2009 by Ann Connolly in Buying Comments[2]
Posted by James on November 24, 2009 at 04:56 PM CST #
Posted by Donna Jacobsen on December 28, 2009 at 11:54 AM CST #