Buying a Short Sale – Is it a Good Idea?
Thinking about buying a short sale? But not quite sure what’s involved? Well after you read this you know for sure if this is what you want. Buying a short sale sounds good and all, but believe it or not, most homeowners are just not patient enough.
A short sale is when the bank takes less than what is owed on the property in order to sell the property before it goes to auction. This helps the bank so they can eliminate excess inventory and shave costs associated with all the foreclosure fees. It also helps the homeowner avoid having a foreclosure on their credit and they can start over fresh. So it helps out both parties when a short sale is accepted.
Right now is a great time to be doing or buying short sales. They are all over in this market and you can score some really good deals.
Advantages of Short Sales
Buying a short sale has one huge advantage and what attracts most homebuyers that are interested in buying short sales. The biggest advantage would be the discounts. These can be HUGE! We’re talking .50 to .60 cents on the dollar. That’s a big deal. Especially right now what everything seems to be upside down.
A home that at one point has a loan on it for $500,000 you might be able to pick up for $300,000 – $350,000. This instant equity out the gate is what attracts a lot of short sale buyers. I mean, who doesn’t like instant equity, right? However, along with the advantages comes the disadvantages.
Disadvantages of Short Sales
Some of the disadvantages of buying a short sale includes not being able to choose your dream home. Unfortunately, with short sales, you can only pick from a select list of properties that are actually going through the short sale process. And sometimes this list of properties may not fit what you’re looking for. I know for me, my wife was EXTREMELY picky and wanted a certain house, in a certain area, that looked a certain way, and there were no buts about it.
Another disadvantage is the condition. In many cases the homes are not finished or they are run down and in need of repairs. Occasionally you’ll find the nice home that has been taken care of and presentable. Usually the homes are in need of some TLC and need new appliances because the old ones are gone.
Probably the biggest disadvantage of buying a short sale is the waiting. Sometimes it takes months and even years for the short sale to approved. The quickest ways to get it approved it to offer a reasonable offer out the gate. See when an offer is made, either by yourself or through an agent, the offer might get looked at within 60 days. If they don’t like your offer they’ll tell you it’s too low and to resubmit the offer. Then the process starts over again until an agreement can be made.
If no agreement is made, then you’ve spent 6, 8, 12 months hoping to get this property and nothing pans out. It will feel like a complete waste of time and you have to start over again. That’s why if you are buyer, either work with an agent or investor because they’ll do most of the work for you because they don’t get paid until they sell the house to you.
The best way to find short sales is to call up a local agent or look at the free real estate magazines inside the grocery stores and you’ll see several short sale properties listed with multiple agents. Also, when they say “approved” it doesn’t necessarily mean the short sale is approved. It just means they’ve been approved to negotiate the short sale in behalf of the homeowner. There are cases where a short sale has been approved and the buyer backed out, but this would be the exception and not what is typical.
The disadvantages might be a lot longer than the advantages, however just that one advantage makes up for the disadvantages and so buying a short sale is a great option in my opinion.