Foreclosure is just a process. It has 3 steps:
1. Short sale: it is an initial phase. Home owner is delinquent on mortgage
for weeks or months, and the owner want to make it a short sale, which means
owners want all debt they owe to the bank go away. Now bank will say, yes
or no (usually months later after you present an offer). So even the price
you offer was accepted by the owner, it has nothing to do with the final
price that the bank will accept. My experience is, in NJ, that bank usually
come back with market price of similar house, which make the purchase not
attractive at all. But when owners owe mortgage to more than one bank, that
complicates things like a hell. One bank approves one offered price, but the
other may not. If it is a community with home owner association, the short
sale owners may owe HOA fee too. This is another variable buyer need to
consider. In summary, if you want to buy a short sale, you need to know 1.
whether the price has been approved by the bank, and 2, what other liens
that this owner has such as HOA dues.
2. Auction: It is the second phase. it is a cash transaction which may not
apply to most of us.
3. Bank owned: after the first 2 steps, the bank still cannot get it sold.
The bank decide to do a little renovation and sell it at a little lower the
market price. such properties usually have potential issues for pluming,
heating, air conditioning, termite. A home inspection is a must.
So far, I have not had good experience with short sale or bank owned, so
buyer should be aware of all these pit falls.
The best investment opportunity, I found out, is the property was owned by
seniors, but they need money to go to the supported living community, or
they die and their kids want to get rid of the property. Usually those house
sold very cheap.