Distressed Property Buyers Will Need Patience

While there are far fewer short sale and foreclosure properties available than there were even a few months ago, you may still find one you’re interested in. Be aware, however, that the process of financing a distressed property (a foreclosure, or a short sale home) is somewhat different from financing a home in the traditional way.

To clarify, with a foreclosure property the lender has started the process of taking it back from the current owner. If the process has completed itself, the property will most likely be vacant.

A short sale property is one in which the occupant attempts to sell it, as he or she can no longer afford the mortgage. The occupant’s lender works with him or her to find a buyer in hopes of avoiding the expensive and time-consuming foreclosure process, which would be the lender’s next step if a sale doesn’t happen.

In either case, your real estate attorney will be handling much of the legwork in dealing with the lender, who is also the seller at this point. The process of selling a distressed property requires more time and documentation than a traditional sale, and buyers will need patience.

Short sales, especially, can take time, as lenders have exhaustive processes requiring huge amounts of documentation from the property’s seller.

The document outlines the seller’s financial position and shows why he or she can no longer afford the property; in other words, it explains why the seller needs a short sale.

Often properties that are vacant and have been vacant for some time (especially those in colder climates) may come with “as is” clauses in the contracts, meaning that the seller/lender won’t be liable for any future issues arising from the condition of the property.

The buyer will, however, have the opportunity for a home inspection after signing the contract, but before moving forward with the purchase process.

Two of the Biggest Mistakes Home Buyers Can Make

Two things are absolutely vital for home buyers to do before they attempt to finance a home: 1) know and understand your credit profile, and 2) think about how your income could change due to life events in the future. Miss these and they will become two of your biggest mistakes.

Credit reports

Knowing ahead of time what an underwriter will see on your credit report is extremely important both for you and your loan originator; in the event that information is incorrect and needs to be changed, you can do it prior to falling in love with a home and making an offer. If there are errors (and depending on their extent), the process can take up to 60 days, or even longer in some cases.

There many ways to get your credit report pulled. The two best options, however, are to have your mortgage professional do it – even if he or she charges you for the service – or you can approach the credit bureaus (TransUnion, Experian, and Equifax) yourself. There also are websites that promise to pull your report for free, but be cautious – there are scamsters out there.


Home buyers often don’t foresee changes in family size or employment status that could reduce your household income and the ability to pay your bills. Plan for a rainy day when you decide the amount you want to borrow; you never know when you might need an umbrella. Your mortgage professional can help you anticipate future changes and plan for them.