Advantages of Buying a Short Sale

There are a couple questions that you should ask yourself before deciding if a short sale is a good option for you (as a buyer). Before asking yourself these questions though you should make sure that you understand what a short sale is.

A short sale is when the current owner of a home cannot afford to pay back their loan to the bank so they are asking the bank to take less than they owe. It will still put a ding on the owner’s credit but it saves them from going into foreclosure and having a foreclosure on their credit report. The bank also wins because they don’t have to go through foreclosure and encounter the legal fees involved and hold onto the property while the current owners are falling into foreclosure.

And of course, the simple answer is, it depends. If you’re out looking at homes on your own because you know more about real estate than a professionally licensed salesperson, well best of luck to you. Stop reading and go buy your short sale (little poke at the know-it-alls).

Okay, so we got rid of those people. Now, if you’re out looking on your own because you’re just new to the whole experience of buying a home, then I would say you should not jump in and try and find a “deal” on a short sale. Why? Because you don’t know what you’re doing and you’ll find that you’ll waste a lot of time and ultimately become frustrated by your lack of progress.

Many of the homes being offered for a short sale are priced below market value to entice a buyer to go through the long process of acquiring the property. If you have the time to wait for the bank to decide to approve the short sale you could have a great property at a great price.

The more information you can find out in advance can save you many months of lost time if the deal does not come together. It may even be prudent to have a title search done on the property to insure that it will not be foreclosed on after you have moved into the property.

You can’t be in a hurry. Negotiating a short sale might only take a month but in most cases it can go 90 days or longer. So don’t hire a mover, end your lease or lock your rate until you have confirmation that your offer is approved by the bank. If the seller accepts your offer that isn’t an approved short sale; any offer the seller accepts still requires approval from their lender.

You are buying the house “as is.” In rare cases, such as in an environmental problem, the lender will pay for repairs but most if the time you are getting the house as is, as found. The seller is in hardship, so they won’t be able to help either. So make sure you do your inspections and know what you are getting into before going forward.

Buyers pursue short sales to get a good deal. So when you see a price listed for a home that you think is too low for the neighborhood, before you jump on that price like hot fudge on a sundae, ask your agent to call the listing agent to find out if the home is a short sale.

Because you might want to think twice about making an offer on a pre-foreclosure, short sale home. It’s not as simple as you may believe, and very few can close in 30 days or less.

Waiting for an answer on a short sale can be frustrating. A short sale happens when a seller’s lender agrees to accept less than its unpaid mortgage balance to facilitate a sale between the seller and buyer, and banks take a long time to decide.

Buyers gravitate toward short sales for two reasons. The list price is attractive and they believe the seller is desperate. However, neither of those beliefs is necessarily true.

By and large they are selling pretty close to asking prices, with those prices dropping in small intervals and frequently while the home is on market. The better and newer houses tended to sell short, while the older ones ended up in foreclosure and selling as bank owned properties.

The better values in many cases were the properties that were selling short of the original purchase financing, vs. those that were selling short of inflated appraised values at time of refinance after purchase. Those based off true market value, purchase price, were selling close to 2008 assessed values. Many were selling over asking price.

Tags: Buying A Home, Couple Questions, Credit Report, Current, Foreclosure, Hurry, Lost, Lot, People, Real Estate, Salesperson, Short Sale, Simple Answer, Title Search