Short sale properties can be a low-cost way for many people to purchase the home of their dreams. These homes, also called distressed, are ones that the owner can no longer afford. Rather than letting it fall into foreclosure, the bank agrees to allow the owner to sell it for less than they owe. While this reduced cost can be a huge benefit for qualified buyers, there are some pitfalls to watch out for as well.
The most important advice when purchasing one of these home is to use a real estate agent who has experience with short sales. Do this by looking up other short sale properties in your area and contacting the agents listed on those properties.
Is It Qualified For a Short Sale?
The first issue is finding out if the home is actually qualified for a short sale. Start by asking if the owner is in the process of filing for bankruptcy. If so, then legally the home cannot be sold. In addition, some owners try to sell a home before their lender has actually approved a short sale. Ask for the lender’s name and contact them to verify that the sale has been approved. In addition, investigate whether the home has a second mortgage. If so, both lenders must agree to the short sale.
Price Is Negotiable
Research the listing price on the short sale just as you would any other home. The best way to do this is by pulling comparable property prices. Don’t assume that the listing price is discounted as it may not be. In addition, don’t assume that the price isn’t negotiable. Examine the comps with your agent and don’t be afraid to offer a price that is lower than the asking price.
Have an Exit Plan
One difference between standard home sales and short sales is that the lender typically doesn’t lower the price if defects are found during the home inspection. To protect against this situation, buyers should have strict language in the initial contract that releases them from the sale if defects are detected.
Be Prepared to Wait
Short sales take a lot longer to process than traditional home sales. It often takes months before a closing can occur. Potential buyers should be aware of this when they are planning their move out dates or relocation plans.