Should I Consider a Short Sale?
You're thinking about investing in real estate. You are wondering whether you should look at distressed sales, including foreclosures and short sales. But you're not really sure you understand what "short sale" actually means. Let's clear up the mystery.
A short sale occurs when a buyer sells their home for less than what they currently owe on the property. However, the sale can only occur by negotiating with the owner's lender and getting their subsequent approval. Why would a lender accept proceeds that do not cover the mortgage? Generally because the owner can no longer make their mortgage payments, and thus they basically take what they can get.
As a buyer, you may want to make an offer on a short sale listing but there are a few things that you should consider before doing so.
First, in a traditional real estate transaction, you are negotiating only with the seller of the property, which means that you could be under contract within a few days or even hours. With a “short sale”, your offer must be submitted to the lender for their approval. It is not uncommon for this to take anywhere from six weeks to six months. The reality is that the only thing short about the sale is the amount the lender will ultimately receive. And after waiting for months for an answer, you could still be rejected for whatever reason including receiving a higher offer. Thus, short sales are not for the buyer who is relatively anxious to enjoy their new beach home.
So you've waited it out and your offer gets approved. You will want to have a home inspection so that you are aware of any issues with the home, but understand that short sales are sold "as is". That means no negotiating with the seller to make repairs because they have no funds to do so. Thus any repairs will be the responsibility of the buyer. The only good news is that if approved, your transaction should close fairly quickly.
In the end, a short sale is not necessarily even a bargain. It simply means that the value of the home has fallen from a previous period in time. So chances are you're simply purchasing the home at today’s market value. Meaning, this unlikely to be the deal of the century.
As with any real estate transaction, should you find yourself interested in a short sale property, a REALTOR® who has experience with short sales will be able to help navigate this complex transaction.