Buying a Short Sale
Buyers in the real estate market tend to eye a short sale as a good deal. To the inexperienced buyer, buying a short sale seems like a great way to buy a house at a low price. Who wouldn’t want that?
The truth is, a short sale can be a great way to get a good deal on a house. But it does not guarantee a below-market price. Even for short sales that do sell for a bargain price, the short sale process may take longer. And offer more hurdles than a standard sale. Before considering a short sale, take the time to get a realistic picture of the short sale process.
What Is A Short Sale?
A short sale is the sale of a property for less than what is owed on the mortgage. In these situations, the seller owes more than they can pay back in one lump sum. The seller must demonstrate to the lender that they truly lack the finances to pay what they owe. And the lender must agree to accept a discounted payment. After all, they are the ones who will take the financial hit! Unlike a standard home sale, the lender, not the seller, agrees to the final price in a short sale.
Potential Benefits of a Short Sale
The main reason people are drawn to a short sale is the potential for a low price. Once a homeowner has come to the realization that they can no longer afford their home. And the bank has agreed to accept a low price, both are motivated to move the property. The homeowner wants to move on and the lender wants to recoup their money as quickly as possible. The longer the house sits on the market, the longer the bank has to wait to be paid. The lender may be receptive to a lowball offer. You may face lower competition than usual because many buyers shy away from a short sale. And unlike a foreclosure, where the occupants are evicted and the house sits vacant, in a short sale, the occupants stay in the home until the closing. When a property is occupied, the owners are more likely to take care of the property and it less likely to be vandalized, giving the buyer some security.
Potential Drawbacks of a Short Sale
While you may snag a great deal with a short sale, don’t assume that will happen. The lender wants to minimize their losses so they may not agree to a lowball price. If the current occupant bought when the market was high and it has since dropped, the price may simply reflect the current market–lower than what the seller paid but not low for the market now. And if you are in a hurry to move, a short sale is probably not for you. If you do enter into a short sale, make sure you have the house inspected but know that the seller is unlikely to pay for any repairs. The bank is the one agreeing to the contract, and they have no plans to lose more money than they already have.
A short sale is not for everyone, but for the right buyer in the right situation, it can be just the thing. If you are in the market for a home and are thinking of buying a short sale, call The Jeremy Ganse Home Selling Team today. Our real estate agents would be happy to discuss whether or not a short sale is for you.