A real estate short sale is any sale of real estate that generates proceeds that are less than the amount owed for the property. A real estate short sale occurs when the lender and borrower decide that selling the property and absorbing a moderate loss is preferable to having the borrower default on the loan. It is therefore an alternative to foreclosure.
So, when home values fall, and sellers are no longer able to pay off their existing mortgages, they have to list their homes as a short sale. Sometimes a buyer may think that short sale is a really good deal. But don’t hurry. It’s not as an easy task as it may seem. And before buying a short sale property get ready to spend some extra money on the fees and on further possible renovations. Here we’ve put together some successful tips to avoid expensive problems that a short sale could bring.
Tip #1: Don’t ignore home problems
Let’s go back and realize again, that a short sale is a result of not being able to pay the mortgage. So, it might be obvious too, that the homeowner had financial problems and couldn’t maintain the home properly. Empty foreclosure properties may suffer from leaks, mold, termites, and so on. And that is natural for a home which has been vacant for weeks or even for months before the purchase. Actually, renovating and remodeling may cost you quite a large sum of money and turn your good buy into a good bye.
Tip #2: Inspect the Home
To be fully confident about the property and find out all its problems you’ll have to hire a professional home inspector. In case you are handy enough and don’t want to spend on this, download our free printable – Home Inspection Checklist. Anyway, home inspection is a must when buying a short sale property. There could be some problems you won’t see going through the rooms. Don’t underestimate renovation costs. If the inspector notices a problem, make sure to ask for a repair or at least do some research and see how much it would cost. See if there are some common expensive problems in your area and ask the inspector to pay special attention to them – mold, termites and structural damage.
Tip #3: Have a Short Sale Realtor
Hire a real estate agent with short sale experience or one who likes short sales. That may be a really great strike against you, if your agent has never handled a short sale before. A good professional will help you to make a good offer and can anticipate surprises. You can just miss some important details, or it may come out that your transaction was not closed on time because of an inexperienced agent.
Tip #4: Don’t hurry, but do not wait too long – close the transaction on time
A short sale transaction almost always takes longer to close than a regular home sale. Typically, a short sale offer must get a respond within 30 days and deliver a final decision within 60 days. But sometimes the lender can ask for some extra paperwork and delay the decision. So you should be ready to put some more effort, money and your sanity for a short sale home. To be able to close short sale on time, you should take care of all loan paperwork immediately after opening an escrow. Keep in mind, that during a short sale, exceptions are rarely made.
Tip #5: Consider legal and insurance information
As homes listed as a short sale and bank-owned homes often sell AS IS, you should do a bit more research. Check the home status. Find out if all renovations have been permitted and approved. Ensure checking out the disclosure statement and see if the house was in a flood plain or had any unpermitted renovation.
Tip #6: Fully Approved Short Sale
Here again you’ll need an experienced agent to help you negotiate the best deal. You can even make a lower offer and the bank will still accept it. So, you’ll get the opportunity to get a great deal without waiting too long. Here the approved short sale list price is exactly the offer the bank will accept. This may happen, for example, if another buyer offered the same price, but didn’t close the transaction. So, approved prices are the best for short sale, and this type of short sales is some of the most highly desirable.
By: Hermine Aslanyan
Additional Useful Resources:
20 COLD, HARD FACTS ABOUT REAL ESTATE SHORT SALES by Lynn Pineda
What You Need To Know About Buying a Short-Sale House via Ferris Property Group
How To Get A Mortgage After A Short Sale by Anita Clark