Understanding Pre-foreclosure, Short Sale and Foreclosed Phoenix Homes
| The process of becoming a Foreclosure home normally includes: For a number of reasons Phoenix homeowners cannot make the mortgage payments - often due to job loss, divorce, or illness. Arizona Foreclosure law defines the minimum time frames that lenders and their designated Trustees must adhere to when foreclosing Phoenx homes for failure to make mortgage payments. Depending upon the amount of equity in the Phoenix home and financial resources of the owner unable to make their house payment, they may (a) work out a payment plan with the lender to either forebear the back payments, defer payments for a short time, extend the length of the loan or lower the interest rate to avoid default, (b) list their home for sale with a Realtor and with the assumption the bank will be willingness to accept something less than the full amount owed (Short Sale) when a buyer is found or (c) ignore the problem until they are foreclosed and evicted. Sadly 60% fall into category (c) and may be your worse option.
A property becomes a foreclosure when alternatives (a) or (b) above fail and (c) occurs. Best home values to buy right now are either 1.) "spec homes" built by one of the Phoenix new home Builders with unsold inventory, 2.) homes for sale by motivated sellers who are able to price their homes to compete with New Home Builders, 3.) Bank and Government owned foreclosure (REO) properties, 4.) Short sales (Pre-foreclosures) when the bank is cooperating with the owner to sell the property for less than is owed and approved the short sale. Foreclosure properties may be some of the least desirable properties on the market as a result of inferior condition or location. Avoid any property with incurable defects - you'll never get the return you expected. Contact me for a list of incurable defects to avoid. Foreclosure properties may have a great deal of deferred maintenance - i.e. fixers - because the previous owners couldn't afford to maintain the home and make repairs. The owner have damaged their property before abandoning it or vandals and thieves may have "stripped" or vandalized it. Lenders sell their bank owned homes "as is" without doing repairs and the buyer must come up with the money to do repairs after they own the home. Lenders have already discounted the asking price of the home by the estimated cost of repairs needed to make the property habitable. During your inspection period get all quotes for repairs to make sure the foreclosure is still the bargain you thought it was. If it is not, cancel the contract and look for another property. Foreclosure property buyers need cash to repair and fix up Phoenix foreclosure properties. So Buyers, having difficulty raising cash for the loan down payment and closing costs, may want to to purchase a well maintained, well priced resale properties including certain Short Sales and not a foreclosure. An FHA 203K loan allows the buyer to finance repair costs up to $31,500 (plus a 10% cost overrun allowance). The appraiser determines the future value of the property after the work is completed to justify the purchase loan amount that includes the money to pay for repairs. After the close of escrow invoices for repairs are submitted to the lender for payment. Contact me for names of lenders who offer this financing option. Pre-Foreclosure or Short Sale properties are normally in better condition than a Foreclosure but they are heavily encumbered with debt. Short Sale and Pre-Foreclosure properties may be a better option for "cashed strapped" Buyers looking for a "good deal". These properties are normally in better condition than a foreclosure, but they are also sold "as is". Phoenix short sales and pre-foreclosures (as described) have a much lower success rate of closing and can take 2-3 months to get an answer from the lender. The lender may not be able to negotiate a substantial discount in the event there is a first and second loan on the home, unpaid property taxes and other liens against the property such as unpaid homeowner association fees. Foreclosures are not always the best option or the best value for a Buyer. It is dependent upon the Buyer's available cash, the condition of the property and ability to do all or some of the repair work themselves. Among the services I provide my clients are the lender's cost of foreclosing on the property and comparable sales to help them decide upon an offer price, as well as formulating a winning negotiating strategy. It is very important to thoroughly inspect any property before you buy a home. This is even more important when you are buying a foreclosure property in Phoenix, Chandler, Gilbert, Mesa, Queen Creek, Tempe or Scottsdale. Inspections include: a.) a general home inspection, b.) roof inspection, c.) termite and bug infestation inspection, d.) pool/spa inspection, and e.) foundation inspection. Other inspections may include: mold, soils, flood, drainage, septic and well certification. The condition of the property may be such that won't be insurable or you may have to pay higher insurance rates due to the insurance claims history of the previous owners. Verify your insurance company will write an affordable insurance policy for the home you are buying during the inspection period. For more home buyer tips, see my Phoenix Home Buyer Guide to learn what else you need to consider whenever you buy a home. For a list of Short Sale and/or Bank Owned REO's, specify City, Zipcode(s) and/or Subdivision(s) of interest, Price Range, Size of Home and/or Number of Bedrooms, etc.
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