The decline in the housing market has created some attractive buying opportunities, and you thus have heard stories of people scooping up homes at below market values. Foreclosures tend to be quite attractive, especially Fannie Mae owned properties that you can buy with as little as 3% down. However, short sales (SSs) are becoming more common as well. Might these properties be a good opportunity for you? Here are a few things to consider…
What is a Short Sale?
A SS occurs when an owner seeks to sell their home for less than what they still owe on their mortgage(s). It’s often an attempt to avoid foreclosure, or ultimately a way to get out of a home where you are severely underwater.
Who is Involved in a Short Sale?
A normal real estate transaction involves a buyer and seller (and the REALTORS representing them). It’s a simple negotiation and hopefully the parties can agree on a fair price. However, in a SS, you have the added burden of negotiating with the bank-or perhaps two-depending on the number of liens on the property.
How Long Does a Short Sale Take?
A SS can take anywhere from several weeks to several months, and thus the name “short sale” is misleading! Don’t forget that the lenders, if they agree to the SS, are getting less than the outstanding mortgage, and thus their approval can be a long time in coming. Even after several months, there is no guarantee that an agreement can be reached, so the long wait might be for naught.
Are Short Sales Really That Great of a Bargain?
While there certainly are some potentially good opportunities in SSs, more often you will find that the home is really being sold for close to market value, or perhaps a bit less. Sometimes you will find they are listed at prices well below market value, but that does not mean they will actually sell for that amount. Remember, the lender is only prepared to write-off so much, and will sometimes simply foreclose on the house if the offer is too low.
Does a Short Sale Include Repairs?
All short sale homes are sold in their current condition. Remember, the homeowner is not in a financial position to pay the difference between what is owed on the property and the current market value–so it’s likely they do not have the available funds to make any repairs. Of course you should still have a home inspection performed so you understand exactly what you’re buying-just understand that the repairs will be at your own expense.
So, What You’re Saying Is That I Should NOT Buy a Short Sale, Right?
Not necessarily, but it’s important to note that they’re often not quite the deal you thought. And if you’re looking to get a home quick, the SS is probably not the best choice for you. There are plenty of properties on the market today that are priced fairly and well maintained, so for the time and effort spent looking for a SS, you might be better off buying a home the old fashioned way!
