As you work your way through the process of searching for a new home, you’ll very likely come across several that are listed as “short sale” properties. A short sale home is one that is being sold for less than the owner still owes on his current mortgage. This situation is usually approved by the current lender as a way to help a buyer get out of the home without going through the foreclosure process. While the bank may lose some money in the process, it does not lose as much as it would if the owner just stopped paying.
The Benefits Buying a Short Sale Home
The short sale process benefits everyone involved. The seller doesn’t have to go through the foreclosure process (or deal with a foreclosure on his credit report); the buyer can purchase a home at a fair market rate; and the mortgage lender minimizes his losses.
While a buyer can generally get a good deal on a foreclosure property, a short sale is generally considered a safer option. Foreclosure homes are often empty for long periods of time and are sometimes vandalized by squatters, burglars, or even previous owners who are angry about being kicked out. Homeowners who are pursuing a short sale still have a vested interest in the property. It’s likely to be better maintained and they are more likely to work with you and their lender to get you a better deal.
The Downfalls of Buying a Short Sale Home
The process of buying a short sale home can be incredibly long and drawn out. Even if you put in a bid for a home, the bank or mortgage company is likely to take weeks to review it. Remember, they’re looking to minimize their losses, so they have no reason to accept the first bid that crosses their desks.
The other downfall is that you are always buying short sale property on an “as-is” basis. This means you’ll want to spend extra time reviewing the home, possibly even having it inspected before you place a bid. Any problems the home has will immediately become your problem at closing.
You are also less likely to see the seller of a short sale home make repairs or pay for extra items, like closing costs.
So should you consider a short sale home? They’re definitely worth looking at if you aren’t in a rush to sell an existing property or go to settlement. You aren’t going to get the same sort of “steal” you might get buying a foreclosure property, but you are likely to get a home that’s in much better shape. And while you may have to wait a bit longer to go to closing, the odds of you buying a home at a realistic, affordable price are certainly worth considering.