The last few weeks we have written about how to buy a foreclosure in Minnesota and this week we would like to talk about buying a short sale in Minnesota, and the difference between a Minnesota foreclosure and a Minnesota short sale.
A foreclosure occurs when the owner of a home can no longer make their mortgage payments and cannot sell the property. After so many months of not making mortgage payments a bank will foreclose on the house and the owner of the house is evicted from the home. At this point the bank will take over ownership of the house and try to sell it to recoup some of their losses and to get it off their books.
A short sale occurs before a foreclosure. A homeowner realizes that they will have problems making their mortgage payments in the near future and will try to sell their house. The reason it is called a short sale instead of a traditional sale is because the homeowner owes more on the house than what it can sell for in the current market. As Realtors we will determine the market price of a home and negotiate with the bank to sell it for less than what a homeowner owes on the home.
Buying a short sale in Minnesota is similar to buying a Minnesota foreclosure; it takes a lot of time, a lot of paperwork and a lot of patience for it to be complete. There are a couple main differences that we would like to highlight for you.
1. The Home Owner is Involved
Typically when buying a Minnesota short sale, the homeowner is somewhat still involved in the process. They are usually living in the home and will have to approve any showing appointments for their house. If you make an offer on a Minnesota short sale the homeowner will have to approve the offer and accept it before it is sent to the bank. If you are one of many people making offers on the home, the homeowner has the right to choose which offer he/she will accept. While the final decision rests with the bank, the homeowner does have some input.
2. The Bank
Dealing with the bank on a Minnesota short sale can sometimes be more difficult than dealing with them on a Minnesota foreclosure. With a Minnesota foreclosure, a bank has listed the home for sale somewhere near a price that they will accept an offer. This isn’t the case with a Minnesota short sale. When an offer is made on a Minnesota short sale, the bank will send out an independent Realtor to look at the house and create a Broker’s Price Opinion, or BPO for short. The BPO is the Independent Realtor’s opinion of what the house should sell for. If the BPO comes back close to your offer, oftentimes the bank will accept it. If the BPO comes back much higher than your offer the bank will either flat out reject your offer or give you a counteroffer. It is then up to you and your Realtor to decide if the counteroffer makes sense for you.
Buying a Minnesota short sale is worth it because you can get a good deal, but like a Minnesota foreclosure, you have to have the patience to be in it for the long haul. It can be a frustrating experience but in the end it is worth it if you get a great deal on a house you love! If you are looking to buy a Minnesota short sale or Minnesota foreclosure, please give us a call. We are experienced in working with both buyers and sellers when it comes to short sales and have the testimonials to prove it!
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