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If you have questions about this change, you're in the right place. Our editors, experts, and community of change optimists have answers!

VictoriaB

Question:I've been reading about all the home foreclosures and how it's an opportunity for the new home buyer, but the thought of profiting on someone else's loss bothers me. Is there a way to purchase a home in foreclosure without hurting the home owners? Can you

Asked by VictoriaB on 2/5/08 2 Answers»
JohnBroughton

Answer:

If you pay a fair market price for the house, you're not profiting from someone's loss - their house has already lost value. And if the house has been foreclosed on, you're dealing with the bank who now owns the home, not the former homeowner.

For houses where the owner is facing foreclosure, you can actually help a bit if your offer results in the bank accepting a "short sale" - a sale that doesn't fully cover the mortgage, but one where the bank decides the sale is preferable to a foreclosure. In such a case, the owner will still have damaged credit, but not as bad as with a formal foreclosure. But such short sales are fraught with difficulties - banks can be reluctant, there can be a holder of a second mortgage who will get nothing (and therefore has no incentive to spend any time or effort on the sale), and sometimes the owner is simply trying to convince the bank to write down the mortgage and isn't really selling the house at all. Be aware that less than a quarter of houses offered as short sales actually sell before they are foreclosed or the owners take them off the market. (Some buyer's agents won't even deal with short sales because it typically takes months for a sale, if one happens at all.)

Answered by: JohnBroughton on 4/16/08
vineetb

Answer:

Morally it does sound like a bad thing to do. I am also looking to buy and feel the same way. I am looking at pre-foreclosure homes where the owner wants to sell to avoid any further losses and the legal hassles of undergoing foreclosure. These homes are priced well below their market value. But I am being extremely careful so I don't end up in the same situation where the value of the home drops even more in the next 2-3 years.

Answered by: vineetb on 2/11/08
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