Short Sales and Foreclosures

In the McKinney, Allen, Frisco and Plano, TX areas, I am often asked by buyers about Foreclosures and Short Sales; here is some brief info on each one.

Short Sale: A transaction, also known as a pre-foreclosure sale, in which the lender(s) agrees to accept the proceeds of the sale in lieu of the total debt owed by the current homeowner. By definition, the net sale price in a short sale will be less than the total debt balance and the lender(s) may or may not forgive the difference.

Foreclosure: A legal procedure whereby property pledged as security for a debt is sold to pay the defaulted debt. Foreclosure gives a lender the right to sell property that was pledged for a debt.

You may be able to purchase a home at a lower-than-market-value price. If the home is in pre-foreclosure, the homeowner is looking to sell the home to avoid going into foreclosure. These homeowners are usually in a hurry to sell, putting buyers at an advantage.

Banks are also often willing to offer foreclosures at a discount -- the longer they hold these properties, the more it costs them in terms of taxes, maintenance, etc. Foreclosures can be found at all sorts of price points (starter homes, luxury homes, etc.) and sometimes are only in need of minor repair or upgrades.

With some sweat equity, repairs and upgrades, a homeowner can turn a foreclosure into a home and see some appreciation in the property's value.