With so many homes on the market now in Northern Virginia and Washington D.C., there are a lot of deals out there. Some of these deals are short sales and foreclosures. However, most people don’t know what each entail. Yeah, the price looks incredible and you can’t wait to put an offer in. What you don’t know is that these types of homes are not a typical real estate transaction. How are you suppose to know? I mean all you care about is that it’s $100K less than the house selling down the street. To start off, I’ll dip into short sales.

About 99% of the time, the home listed as “short sale” or “third party approval”, has an attractive price that has not been approved by the bank.  In order for a distressed seller to do a short sale or sell their home in an “upside down” scenario, means that they are asking the bank to accept an amount less than what’s owed on the loan. People choose this option if they are unable to continue making payments. This method doesn’t affect your credit as bad as a foreclosure does. So let’s say a home has a real attractive price tag on it and there are 10 offers on it already submitted. The goal of the seller is to get as many offers as possible in hopes that they will keep outbidding each other. Once all offers are in and maxed out, the seller will choose one to send to the bank for approval. This process usually takes about 4 - 6 weeks. Plan on sitting around for a while twiddling your thumbs. The worst part about short sales is that after that 6 weeks, the bank can reject the offer and you have just wasted 6 weeks of searching for a home as a buyer. One more thing, the home is sold “as is” meaning that the seller does not have to fix anything that you want repaired. If you have the time to wait around, then you may want to look into short sales.

Foreclosures or REO’s (”Real Estate Owned” by the bank) are a different story. These are properties that have been acquired by the bank after they have failed to sell at a foreclosure auction. The price on the home will most likely be accepted if you submit an offer for it for full price. The amount of time it takes for these to close is approximately the same as a normal real estate transaction, 30 - 45 days. Although these homes may look great from the outside, more often than not they need some major TLC (tender loving care). In other words, like in a short sale, you have to purchase these homes in “as is” condition. This isn’t always a bad thing though. If you invest some money for new paint and carpet, you’d be surprised how much of a difference it makes. You’ll need to have an imagination when you walk into a home that turns you off right away. What I mean by this is, look around the house and see if there is any damage to the foundation, water damage or mold. If there is only cosmetic damage, it’s an easy fix. You can really take advantage of turning a huge profit if you know what you’re doing. I would only suggest buying a DC metro area foreclosure if it’s in good condition, you’re an investor, handyman, or ready to hire a contractor.

Now are you ready to search for short sales and/or foreclosures?  In Northern Virginia and the Washington DC metro region start here!

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