What’s the Difference between a Short Sale and a Foreclosure?

What’s the Difference between a Short Sale and a Foreclosure?

This is a great question and we get asked this a lot.

This is one part of a longer blog thread where we are talking about distressed sales in Kansas City, and more particularly Johnson County Kansas and what the differences are and which one is right for you. You can read the first post on this topic here.

So back to the main question.

What the heck is the difference between a short sale and a foreclosure?

There are two main differences and they all have to do with where in the foreclosure process a property or owner happens to be.

So what is a foreclosure?

A foreclosure is a listing that is being sold by a bank or other entity that has taken back a home that went into default and was unsuccessfully sold at the foreclosure auction. It is vacant and can be in many different level is disrepair. Sometimes these are called “REO’s”. According to Wikipedia, “The term REO originates from the term Other Real Estate Owned (OREO), which is used on financial statements to classify real estate property owned by financial institution but which are not directly related to its business.” Generally foreclosures are much easier to purchase and can close fairly quickly 10-20 days depending on the lender.

So what the heck is a “Short Sale”?

In short (no pun intended) a short sale is an attempt for a seller to sell a home for less than they owe(selling it “short”) on their mortgage balance in lieu of going into foreclosure.

Why would a bank want to do something like this? Why would any bank agree to sell for less than what is owed? Great question! Foreclosures are expensive and banks are in the business of lending money and not owning homes. If a seller is not able to make payments and the house can only sell for a certain amount of money, then the bank may actually save money by accepting a short sale than going all the way to foreclosure.

We will get into this in a later post, but there is nothing quick about short sales and the can take 77-140 days to close. Yikes!

If you want to find out more you can reach out to us and we will be happy to sit down with you and discuss your options. Also, if you know of someone who is behind on their payments and feels like their only option is foreclosure, then they need to talk to us right away. They have option that can greatly affect their future borrowing ability – they do not have to give up.

Till next time!

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Buying Foreclosures and Short Sales in Kansas City and Johnson County – What’s the deal?

Buying Foreclosures and Short Sales in Kansas City and Johnson County KS can be a very  good opportunity for any buyer, and especially in a buyer’s market you can get a two for one value. So what’s the deal? Is there a deal? How do I find them? How do I buy them?

Do you know what you are getting into?

Make sure you know what you are buying before you get too excited about a possible deal.

Great questions! Lets look at a couple key points that I am going to discuss in detail in future blog posts.

  • What is the difference between a Foreclosure and a Short Sale?
  • Where can I find Foreclosures and Short Sales in Kansas City?
  • Are there any particular requirements for me to purchase a Foreclosure or Short Sale?
  • Are Foreclosures or Short Sales right for me?

What is the difference between a Foreclosure and a Short Sale?

There are huge differences and while both can be a great opportunity, It’s important to know what you are getting into. Especially if you have a very strict time deadline. You will find out the “Short Sale” does not mean “Quick Sale”. We will go into that in more detail in our next post.

Where can I find Foreclosures and Short Sales in Kansas City?

You have started at the right place! With Me! DO NOT GO OUT AND PAY FOR A LIST! Just subscribe to this blog or our Facebook Fan Page to get the info hot off the presses.

Are there any particular requirements for me to purchase a Foreclosure or Short Sale?

Yes, depending on if you are going to rent or live, or finance or pay cash.

Are Foreclosures or Short Sales right for me?

We will discuss things like timeline, type of financing, how handy are you? Do you have a little pile of cash to make repairs and make double your money? Are you patient and can wait for the right deal?

Stay Tuned! If you cant wait for the next post, just email me or contract us here.

Kansas City First Time Home Buyer Fears (part 3)

Can I afford the maintenance?Don't get caught without an inspection!

The third concern of new home buyers in our original survey was “Can I afford the maintenance?” If you missed the prior two posts you can read about Buying in the Right Area and What Happens if Something happens to me financially?

So congratulations! You now own your own home and have the freedom to not worry about what the landlord will say if you paint that wall purple (or Red and Blue). Along with this freedom comes the new “privilege” of home ownership – as my wife like to call it. One of the most scary or stressful things about buying your first home is, even after the inspection, what if something MAJOR breaks down, like the furnace, air conditioner or water heater?

Home Warranties

One way to help mitigate this fear is a home warranty.  The great news about this home warranty is that more times than not, the seller is willing to include it in the purchase of their home. So, if this seller has not kept up on their deferred maintenance you are protected if any of the covered appliances and systems go down for a small deductible as little as $75. We go over this benefit with you in detail during our buyer consultation here at our office.

The Actual Costs

I love my parents! Let me preface this with that, but GEEZ they can scare the BE-JEEBUS out of you when it comes to buying a new home! Everything bad that can happen to your home, will, and will cost you at minimum $5,000 for each event!I know that they are only trying to protect us, but when they don’t like a home, parent’s find it hard to tell you that they don’t like your choice. Instead of hurting your feelings, they often try and scare you with maintenance horror stories.

Here is a list of average costs for upgrades and or replacement costs of most typical projects as a home owner.

Keep in mind, these costs can vary with location, market and even between contractors. It is always advisable to get at least three quotes when planning on spending a considerable amount of money on your next renovation project. We work with many trades and contractors and always keep a list of honest professionals. Let me know if you would like some contractor referrals, I’d be happy to send them your way.

Set Up A Reserve Fund

It is also not a bad idea to set up a reserve fund for maintenance and repairs. A survey showed that a homeowner can plan on spending 1-4% of their homes value per year on maintenance. Keep in mind this is an average over time. Roofs, for instance can be $10-$15k a pop, but they last for 25-30 years if installed correctly. Now in the Midwest, in places like Olathe or Lenexa, you can plan on replacing your roof more often with hail storms, but then your home owner’s insurance usually gets involved there.

So if your home is worth $150k plan on putting $1500 aside a year on improvements and projects to keep your investment running smoothly and by keeping up on deferred maintenance you are saving tons of money in the long run. Go to your bank and have them set up a savings account and label it “Home Repairs” and put in $100 a month into it. If after 5 years you haven’t really needed to use it you may just cap it at that and be okay.

Thanks again for all those who helped put this survey together!

So what crazy DIY projects have you taken on and either surprised yourself with how well they turned out, or did something crazy happen that you can laugh about. Leave a comment below and let us know!

Thanks again for reading! As always, our business is as amazing as it is due to friends and family like you. Without your referrals we would not be here today. Thank you for trusting us with your family and friends!

KC First Time Home Buyers Fears (part 2)

First Time Home Buyer Fears part 2

Yesterday I started to address the results of a survey I posted on my Facebook Fan Page on what are some of your biggest fears when you bought your first home, or what are you concerned with most if you are thinking about buying a home right now. You can read the first post in this series here.

So to quickly recap. What were the top 3 first time home buyers fears in the Kansas City area?

  1. Buying in the right area.
  2. Can I afford it if something happens to me financially?
  3. Can I afford the maintenance?

Can I afford it if something happens to me financially?What now?

This is a really great question, and is still at the front of everyone’s mind in light of the recent economic situation. People who have seemingly rock solid jobs with the city, government, fortune 500 companies are being let go daily. So what happens then?

The first thing is having a great conversation with your lender and making sure you buy what you can afford. A good lender will not just give you a blank check, they will sit down with you, go over your monthly expenses and discuss with you what you could and should take on. The lenders who are still in business are good, there is a reason they have survived the market shift. Listen to them, but more importantly ask them questions. Here are a couple good questions you may consider asking your lender:

  • What will my total PITI (Principle, Interest, Taxes and Insurance) payment going to be?
  • What is my current debt to income ratio?
  • If I needed to sell quickly is this loan assumable?
  • Are there any prepayment penalties if I pay off my loan sooner rather than later or have to sell quickly

I will be going much further into lending, terms and the different products available in a future post.

The next step is making sure you are not paying too much for your home. As a market expert, I see hundreds of homes a month and watch the market statistics religiously. A phrase I use often with my clients is this, “If you are not a little embarrassed by your offer, you are offering too much.” This always gets a smile and you can see body language relax a little. I will always let you know if a property is grossly overpriced or if it is a Smoking HOT deal. Actually, I’m required by LAW to let you know about SMOKING HOT DEALS 🙂 That is, if we have an agency agreement.

Worst case scenario, if you lose your job and main source of income, there are options to mitigate your losses. Not over extending yourself on your mortgage on the front end can help you possibly handle it on one income until you get back in the workforce. Buying it correctly and not paying too much gives you the best opportunity to sell your home quickly and possibly not lose any money.

Stay tuned for part three of this survey Can I afford the maintenance? You can subscribe to this blog by clicking on the RSS feed icon or like our fan page and be updated when a new post hits.

Download our FREE First Time Home buyers eBook that talk about the step by step process that myself and my team will help with.

As always, thanks for reading!

P.S. If you or a friend or coworker is thinking about buying a home or selling a home in the next 30-60 days let us know! We would be thrilled to help your friends and family.

Top 3 First Time Home Buyer Worries. You are not alone.

Stressed about buying your first home?Being a first time home buyer can be pretty scary. It wasn’t that long ago that we sat at the closing table, staring at that seemingly endless pile of paperwork, thinking to ourselves, “Are we really doing this?” At that time I was not a Realtor, I was just like you – but I have never forgotten that butterfly sickness that came over me when it was time to close. So even though I now close 3-4 transactions a month, I am still very much aware of the sensitivities and stresses of the closing table.

I was curious to see if my personal initial fears were shared by many others. I harnessed to power of Facebook and asked a survey question on my Fan Page, http://www.Facebook.com/MatSellsKC and I wanted to discuss the top three first time home buyer fears an also discuss some ways to ease that fear a little bit.

When buying or selling your first home, or if you are thinking of buying a home, what is your greatest fear or concern?

So I posted this question with the option for readers to write in their own answer or vote on one already there. Over 30 friends voted(thanks) and the top 3 first time home buyer fears were:

  1. Buying in the right area.
  2. Can I afford it if something happens to me financially.
  3. Can I afford the maintenance?

Buying in the right area

Okay, I have to bite, we have all heard this term – there are only 3 things that matter in Real Estate – Location, Location, Location. 39% of my friends who took the poll agreed. So what does location really mean, and how can you make sure you are buying in the right area.

There are 5 things to consider when choosing location:

  1. Commute Time to work – Do I get a smaller house and shorter commute, or do I add 10 minutes to my drive time and double my square footage?
  2. Schools– Do the public schools in the area provide the education and extra curricular activities we are looking for, or will be looking for in the near future?
  3. Local Amenities – Are the stores close by? Do we have access to the arts/entertainment? How walkable is my neighborhood?
  4. Public TransportationDo I have access to bus lines, trains/light rail?
  5. Privacy – How close to my neighbors do I really want to be? Can they look right into our bedroom window?

Take some time to talk about or discuss these main issues to help streamline your decision making process. As a neighborhood expert, I can help guide you through some of these decisions and show you all the homes that fit your specific needs and criteria.

I will be tackling fears 2 and 3 on a future blog post. In the meantime, let me know in the comments section below, what other considerations are you thinking about when looking for the right area to buy a home in Kansas City?

Download our FREE First Time Home buyers eBook that talk about the step by step process that myself and my team will help with.

As always, thanks for reading!

If you or a friend or coworker is thinking about buying a home or selling a home in the next 30-60 days let us know! We would be thrilled to help your friends and family.