Should I Still Consider a Short Sale in Today’s Market?
Short Sales are not as prevalent as they were a few years ago but they are still out there and buyers are finding great deals. Now is a great time to buy considering the competition and the season. During the fall and winter months the real estate business slows dramatically but many buyers wait until this time of the year to buy so they don’t have to deal with the competition and help find sellers more motivated to get their property sold. However, a short sale usually happens, when it has to happen so short sales are always out there because some homes are still underwater and need to sell fast. This is where buyers can really cash in.
What is a Short Sale?
A short sale is where the seller and the lender has agreed to sell the property for less than the seller owes. Homeowners will sell it, get approval from the lender, and no longer have the stress and burden of a mortgage payment. It is different than a foreclosure in that the seller is working with the lender instead of simply walking away without communication. Foreclosures take longer due to communication attempts, eviction notices and auctions. Short sales are usually a little bit easier because they are still handled by the seller, a real estate agent and the buyer, however, they can still take a few months to finalize. Buyers need to be willing to wait for the deal and should not be in a hurry but can know the advantages of a short sale can be great.
The Lender Approves, Not the Seller
The lender is the one that approves the offer, not the seller. The mortgage lender will be receiving less than the amount the borrower owes on the mortgage therefore this lender will need to verify that the homeowner cannot continue to pay the mortgage and determine if a short sale is better than foreclosing on the property.
There are some downsides to buying a short sale property however. They can take more time that a traditional sale because of the amount of parties involved. You have lenders, underwriters, banks, escrow, buyers, sellers and agents all involved in this process and any little hiccup can extend the time. There are many roadblocks such as extra research, buyer financing, or inspection hassles. More often than not you’re buying a short sale “as is”, so what you see is usually what you’ll get.
Lenders will rarely agree to pay for any extras that a regular sale would normally agree to such as repairs and replacements. This could mean higher closing costs for the buyer as well as inspections and repairs. However, you can always ask and banks may allow certain funds for the sale if the home in non-livable.
Don’t Buy it Alone
One thing to note about buying a short sale is to use a professional. Those that try to handle a short sale transaction on their own typically come up against many roadblocks and short sales are a complex nature in and of themselves so helping resolve discrepancies, putting together a viable offer negotiating the best deal is best handled by a professional buyers agent on your behalf.[Adapted from Source]