Home sales usually fall into one of three main categories: traditional sales, short sales, and foreclosures. For buyers, each has pros and cons, though generally speaking the cheaper properties are short sales and foreclosures. But if you’re a buyer, you need to keep in mind that these properties are usually cheaper for a good reason. The best route for you depends on your financial situation and your goals, especially whether you’re buying the property live in or as an investment. Let’s take a look, then, at traditional sales vs. short sales and foreclosures in Massachusetts.
Traditional Sales
This is what first comes to mind for most of us. Traditional sales involve a seller and a buyer who agree to sell/purchase the property for a specific agreed-upon price. Although there may be circumstances causing the seller to sell, they are not being forced into it by a lending institution, as is the case with short sales and foreclosures in Massachusetts.
In a traditional sale, the seller typically has equity in the home and can afford to pay off any remaining mortgage balance, along with any associated selling costs such as real estate agent commissions, which usually range from 5-6% of the sale price. The transaction tends to be more straightforward, with fewer complications and delays, making it an attractive option for both buyers and sellers.
Buyers in a traditional sale can often expect a property that is in better condition or new compared to short sales or foreclosures, as these homes are usually well-maintained and may have undergone recent improvements to enhance their market appeal. Additionally, traditional sales do not typically involve the lengthy approval processes required for short sales or the potential legal complications that can come with foreclosures.
For sellers, traditional sales offer the advantage of negotiating the sale terms, such as the closing date and any contingencies, directly with the buyer. This flexibility can be particularly beneficial in competitive markets like Massachusetts, where sellers might receive multiple offers and can choose the one that best meets their needs. Moreover, because the sale is not distress-driven, sellers can often secure a higher price for their property compared to what they might get in a short sale or foreclosure situation.
Overall, traditional sales provide a more stable and predictable transaction process, benefiting both parties involved and often resulting in a smoother and quicker sale.
Short Sales
With short sales, the money from the sale isn’t enough to fully cover the amount owed on the property, hence the term “short.” Because the seller has to get the lender to approve the sale price, there is nothing short about the amount of time a short sale takes. This process can be lengthy and requires patience from both the buyer and the seller, as the lender’s approval is a critical component that can introduce significant delays.
However, a short sale allows the seller to avoid foreclosure, which can be more damaging to their credit score and financial future. By opting for a short sale, sellers can often secure a more favorable outcome, potentially allowing them to qualify for another home loan sooner than if they went through a foreclosure.
For buyers who are willing to wait after making an offer, short sales can yield some good deals. These properties are typically sold at a lower price than comparable homes on the market, as lenders are motivated to recoup as much of their investment as possible without going through the more complex and costly foreclosure process. Additionally, buyers need to be flexible and prepared for the potential delays and uncertainties inherent in short sales, but the financial savings can make this effort worthwhile.
Overall, while the process of purchasing a short sale property can be daunting and time-consuming, the potential benefits for both sellers and buyers make it an option worth considering in Massachusetts.
Foreclosures
If a homeowner fails to make mortgage payments, the lender can issue a foreclosure notice, which states that the property will go into foreclosure after 90 days. If the payments aren’t brought current or payment arrangement isn’t made, the property goes to auction where individuals and companies can bid on it (usually with a set minimum bid). Often, the lender will take the property back with the intention of reselling it.
Typically, foreclosures are great for buyers looking for good deals, but the complexities of the transaction can be pretty daunting. In fact, it can get downright ugly at times because people are being forced to give up their home. Owners are sometimes forced into foreclosure sales owing to things completely out of their control like an extended illness, job loss, or divorce.
Foreclosure can be painful for the homeowner, but good news for the deal-hunting buyer. The bright spot for sellers is that they can exclude canceled debt from their income tax returns, and they no longer have to make mortgage payments. The entire process can take several months, and the house is theirs until everything is finalized.
Observations About Short Sales and Foreclosures
Short sales in Massachusetts typically take a lot longer to close than traditional sales, requiring complex documentation and extended back-and-forth between the seller and lender. If you make an offer on a short sale, it not only has to be accepted by the seller but also has to be submitted to and approved by the lender (who is taking a loss). If your offer isn’t approved, then you’ll have to restart the whole process. As a result, short sales usually take three to six months to complete while foreclosures usually close within 30 to 45days of an offer’s being accepted.
Another important aspect to keep in mind is that short sale and foreclosure properties are often vacant for long periods and frequently in disrepair. In addition, these properties almost always must be purchased as-is. The good news here for buyers is that if you’re willing to invest a little in repairs and put in a little elbow grease, you can get a great deal on these properties.
Traditional sales vs. short sales and foreclosures in Massachusetts – which one is right for you? Again, it depends primarily on your purpose in buying the property, what you intend to do with it. It also depends on whether you’re willing to play the waiting game and are prepared to take on a distressed property. In such a situation, it’s best to lean on the expertise of a qualified real estate professional. And we’re prepared to provide the guidance you may need. Call us today at (781) 258-6976!
Interested in Massachusetts short sales or foreclosures? We can help! Contact us today for more information! (781) 258-6976