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Should I Buy a Short Sale Home?
Should I Buy a Short Sale Home?
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.
What are the Benefits to Buying a Short Sale?
Even though the housing market is strengthening, current buyers will find that inventory is still rather low, and there is a good number of short sale properties to choose from. What is a short sale exactly, and are there benefits to you, the buyer?
During a short sale, the homeowners agree to sell the house for less than what they owe on the loan, which means the lender must also agree. If you are in the market for a new home, short sales are a good option to consider. They do take time, however, since the banks must approve the offer. This makes it difficult to pinpoint an exact closing date. Short sales are not recommended for people who need to move quickly or before a certain date, but if you have some flexibility, you can enjoy the following benefits with a short sale.
Low Housing Price
Short sales are listed lower than the normal selling price. Not only can you scoop up a nice property for less, but also you can negotiate with the seller and the banks, something that is hard to do with a foreclosed property. In a traditional sale, the homeowners would be responsible for fixing things up, but with a short sale, this will be your responsibility. It’s important to understand that you may have to purchase a fixer upper, but again, this will be reflected in a lowered cost.
Cooperation from Homeowners
With a short sale, the sellers are eager to sell their home. The sooner the house sells, the sooner they can move on and start repairing their credit. This is a much different scenario than if you were to buy a foreclosure where the people need to be evicted and may cause damage to the home out of anger. This cooperation between the sellers and the buyers is helpful in making the sale work to everyone’s advantage.
Favorable Financing Terms
Short sales are generally in the best interest of the bank. Instead of having to pay all the costs associated with a foreclosure – eviction, administrative costs and repairs to the home – a short sale allows the lender to take a loss on the loan, but then start getting some of that money back by approving the short sale and moving the new buyer into the home. Since sellers are behind on their mortgage payment by a few months, it makes sense to get someone in there who can pay. This often gives buyers the advantage by getting buyer-friendly terms such as low interest rates.
If you’re considering purchasing a short sale, call Cedarcrest Realty today!
