In particularly hot housing markets like Denver, many buyers are including distressed (short sale, REO/foreclosure) properties in their searches. These types of properties can be great way to get your hat in the ring and begin building equity in your new home. But which type is best – a short sale or foreclosure?
Honestly, there’s not really a cut-and-dry answer to this question, rather it really depends on your priorities. Before starting your search, you should know the benefits and drawbacks of buying either type of distressed property: foreclosures and short sales.
According to Lender Processing Services, nearly 2.2 million homes in the U.S. were in foreclosure in April. On average, they sell for about 30 percent less than non-distressed properties.
In April, the median price of a move-in ready foreclosure was $185,000, whereas a non-distressed property’s median price was about $267,300. These types of deals are possible because homebuyers can negotiate closing costs and price in foreclosure sales. Buying a foreclosure typically is faster and less expensive than a short sale.
Foreclosures can be more work as well. That’s not always the case; however, since foreclosures are vacant, they may experience more damage or wear and tear than short sale properties, which are technically still owned and usually occupied by the homeowner. It is possible to find foreclosures in better condition and if you’re particularly handy some wear and tear might not be a problem. Still, it’s important to know what you’re in for with foreclosed properties.
If time is of the essence to you, keep in mind short sales take longer. The name “short sale” is actually rather deceiving — these deals can drag on for months. Again, this isn’t always the case, but it’s something buyers should be aware of.
Regardless of the route you choose, you can still get a good deal if you know what you’re looking for in a home. If your family needs a house in the next month or two, a foreclosure may be a good option. If you have more time to work with, short sales could be a better way to go.
Ready to start the search?
Contact Metrowest today – we’d love to show you around!