What is a Short Sale?
Short sales. They’re a seller’s worst nightmare, and a bargain buyer’s dream. But just what are they? And does “short sale” mean “fire sale” in the sense that you should run out and buy the property before it’s taken off the market?
A short sale occurs when a property sells for less than what’s currently on the mortgage. Typically you’ll see these if a homeowner is about to go into foreclosure, mostly due to an underwater mortgage on their home. Instead of sending the home into foreclosure, lenders will sometimes agree to take a lower amount for the property. This can be helpful to lenders, as they won’t have a property that they need to unload; and it can be good for seller’s as this step won’t damage their credit as much as a foreclosure would.
Short sales can also be really good for buyers, because it gives them an exceptional deal that they wouldn’t have otherwise received. But, if you’re on the market right now, don’t jump at a short sale just because it’s a short sale. There are still some guidelines to abide by to make sure that the sale you’re looking at actually is a sale.
The price you see is not necessarily the price you get
A seller can attach any price they want to a home, but that doesn’t mean that the lender has to agree to it. And if they don’t, you’ll have to pay more. Be aware of this, so that you don’t get too carried away when you see that discounted price on the listing.
You still need to do an inspection
Many people get so excited about a short sale that jump on it without giving it a second thought. And that’s a really big mistake. Home inspections are absolutely necessary any time you purchase a property to ensure that the property is in good shape and that you won’t have to sink all the money you saved into home renovations soon after moving in. But in the case of short sales, it may be even more important for you to get that home inspection. This is because short sales usually come about because the homeowners are short on cash. And when that happens, they’re likely not spending money on making needed repairs to the home.
Research, research, research
People don’t often realize when they walk into a short sale that these homes don’t have the same rules applied to them that other homes do. Homes that are owned by the bank don’t require the same kind of disclosure statements that other homes do. This means that if the home has ever had any problems with the foundation or plumbing, or if someone has passed away in it, you will never know. In the latter case that may not be such a huge deal, but any other situation and again, you could find yourself paying big bucks. So how do you find out the history of a home? Call the city planning department. They’ll be the ones that can help you best.
It can take an awfully long time to move into any home after you’ve purchased it, but it will most likely take even longer if you purchased through a short sale. This is because lenders take longer with short sales, and if the previous owner had legal issues those will need to be dealt with before you move into your home. You’ll also need to make sure that you wait until the lender has approved the price you’re paying – and that can take time, too. Instead of leaving yourself out in the cold, make sure you have accommodations planned while you wait for the sale of your home.
Stick to your savings plan
Yes, it’s a short sale and yes, you want it very badly. But again, you have to keep in mind that you’re so eager for it because you’re saving money. If there are other buyers that are just as eager, they may run up a bidding war. And if you get too deep into it, you’re not going to be saving much money, if any at all. Stick to the plan, remember that you’re there to pay the lower price, and walk away if it gets too high.
Short sales really can be a good deal for everyone all around. But when you’re the buyer you really need to be careful and make sure you’re actually saving a good penny. While it may be tempting to just rush in and buy it no matter the cost, remember that you’re so enthusiastic because it is a really good deal. Still perform your due diligence, don’t be willing to pay more than you should, and you can rest assured that in the end, you’ll get the best deal for you.