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Seasonal Discounts Await Short Sale Buyers

Home buying normally takes a backseat this time of the year, but for buyers who choose to search through the holidays, the returns may be more than worth it. Price cuts are sweeping through all sectors of the market, with savings ranging from a few thousand to as much as half of the going rate.

The best deals can be found in the distressed sector-homes that are being sold to resolve mortgage problems. Foreclosures, short sales, and auctions-dubbed by the New York Times as "the fruits of desperation"-are particularly on the rise and appeal increasingly to buyers looking for a bargain.

A short sale can go for as low as 60% of current rates, although most homes are sold at 85% to 95%. Foreclosures, especially those being sold by the bank, can go for about 50% of market prices. Investors are particularly drawn to these homes because they can easily be fixed up and sold for a profit.

Of course, there are obvious drawbacks to such homes, such as high property taxes and often a lengthy, complex process involving negotiations with the owner’s lender. But many of them are in good neighborhoods, are still in decent condition, and perhaps most importantly, are going for historically low prices.

Short sales are especially common this year as the government's short sale program, HAFA, made it a more attractive option for both lenders and borrowers. Besides keeping homeowners out of foreclosure, they also help banks curb their losses and pull up sales in areas where buyer activity has reached a standstill.

These was a surge in short sales and foreclosures in high-end homes earlier this year, especially in upscale coastal areas such as Southern California and Florida. However, homes in the middle and lower range have started to catch up, and the market is expected to even out as 2011 rolls in.