Things to Know Before Buying a Short Sale
A short sale is a way for homeowners to avoid bankruptcy. If a homeowner is unable to afford their mortgage payments, they might be allowed to sell their home quickly to recoup lost funds. This process is known as a short sale, and it can be a way for buyers to find a great deal on a home. Yet, there are things you need to know before buying a short sale home.
There are a lot of things that can go wrong with a short sale property. A large percentage of short sales fail to close, and this could leave you stranded without the property you hoped to buy. Here are the things you need to know before buying a short sale.
1. Check the Listing Agent
Before choosing a property, do some research on the listing agent. A large number of agents advertise short sales, but they’ve never successfully closed on a property.
You need to check the track record of the listing agent. The listing agent is the primary person who will submit the short sale package to the lender. Since short sales are up to lender approval, you want to be sure your listing agent knows what they’re doing.
2. Research the Other Offers
Because short sales are priced to sell fast, they’re usually significantly under market value. Because of this, they often receive multiple offers. The agent doesn’t need to disclose this, but you can ask how many offers are already on the table.
How you price yourself matters with a short sale. The sweet spot is to give an offer that’s better than the competition, but that still gives you a price below market. If you know the number of offers, you can make a smarter decision about what offer to give yourself.
3. The Home Is Sold As-Is
Unlike a traditional sale, short sales are sold “as-is.” There won’t be inspections and repairs done before the property is transferred to the new owner. One of the risks of buying a short sale property is needing to take on expensive repairs.
The bank isn’t willing to negotiate on price or the current state of the property. They’re just hoping to recoup as much funds as they can. Doing a title search on the property can help you learn more about any potential problems.
4. Short Sales Take a While
Short sales are notoriously slow. Because the process is much lengthier, it’s not uncommon to feel like your short sale is moving much slower than a traditional sale.
Why is the process so lengthy? Since the seller doesn’t have a final say on whether to accept an offer, the seller has to take their chosen offer to the bank. The bank then has its own lengthy process for approval, and this could take several months. Even then, the offer could still be rejected.
5. Not Every Short Sale Is a Deal
Finally, realize that not every short sale is a great deal. It’s definitely possible to save money on a short sale, but it’s also possible that you don’t land the best deal.
Pay close attention to the current housing market trends, local costs in the area, and the state of the home. There’s no winning formula to secure the best price. Sometimes it’s a leap of faith to purchase a short sale home but do your best to educate yourself about the risks.
Is a Short Sale Right for You?
Choosing to buy a short sale might be a smart choice depending on your market, but you have to be careful. You need to know these things before buying a short sale to make sure you fully understand what you’re getting into.
As long as you’ve done your research, feel confident moving forward with the right short sale. Just beware the name! Short sales are rarely actually short. You might have to spend some time securing that perfect property deal.