3 Alternative Options When Purchasing a Home in A Competitive Market

Home Financing
For Sale sign in front of a house

For many, the home-buying process includes researching locations, towns, and school districts, finding a REALTOR® who can help you narrow the list, and then coming to an agreement with a like-minded seller. In reality, the home-buying process isn’t always so straight-forward, especially when factoring in added challenges like limited inventory and bidding wars. What if the person who owns the home you want isn’t using traditional methods to sell their home? Here are three lesser-known options you may encounter in the search for the home of your dreams.

1. For Sale By Owner (FSBO)

As the name implies, an FSBO property refers to one where the property owner has decided to forego using a real estate agent or REALTOR® to sell his or her home. Since sellers are responsible for paying agent commissions, their primary motivation for selling a home without an agent is often saving money.

Buying an FSBO property means one of two things for you. You can either use your own real estate agent with responsibility for his or her portion of the commission, or you can agree to forego using an agent altogether. Either way, recognize that FSBO properties currently make up about 11% of the real estate market, so you may encounter some when making your list of potential options.

2. Short Sale

When a person needs to sell a home but owes more money on the property than it is currently worth, he or she may end up making a short sale. Specifically, a short sale occurs when the homeowner’s mortgage lender has agreed to let the home be sold for less than the remaining balance on the loan. The idea here is that the mortgage lender is cutting its losses and saving the hassle/expense related to going through the foreclosure process.
As a buyer, purchasing a short sale home can be a great way to buy a property for less than it’s worth. Furthermore, the actual process of buying a short sale home isn’t much different from that of a traditional home purchase. The main difference is that everything needs to get approved through the current owner’s mortgage lender—which can sometimes drag the process out a bit. It’s also important to understand that short sale homes often need some TLC, so you should expect to set additional money aside for improvements and repairs.

3. Foreclosure

When a homeowner is no longer able to make his or her monthly mortgage payments, a foreclosure may be imminent. Compared to a short sale, a foreclosure is an involuntary action that occurs when a mortgage lender forcibly takes over legal ownership of a property due to missed payments and outstanding debt. When you buy a foreclosed property, you’re purchasing it directly from a bank.

Buying a foreclosed home can save you thousands or even tens of thousands of dollars—especially when you consider that banks have no emotional attachment to these properties and will often sell them for significantly less than they’re worth to cut their losses. As with a short sale, however, you can typically expect to spend a fair amount of money on repairs and upgrades before moving in. The process of buying a foreclosed property can also be quite slow—but once the deal is closed, you can end up with immediate and substantial equity in your new home.

Which Type of Property is Right For You?

As you can see, there are a number of alternatives to the traditional home-buying process. Educating yourself on these and other real estate issues as you shop for your next home could help you save money, stress, and hassle! Visit our Home Finance Center at our website to help you learn more, because no matter which option you end up choosing, our team at Hudson Valley Credit Union is here with mortgage options to suit your needs.



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