In this unique housing market, many buyers have been enticed by low prices, seemingly too good to be true, and are considering “short sale” properties in their search for a new home. If you are one of these buyers, WAIT! Before you do this, it is important to familiarize yourself with the short sale process, as well as potential issues that may arise. You will then be able to decide if a short sale purchase is really right for you, while having gained knowledge that will prevent a lot of potential frustration should you proceed.
What is a short sale?
A short sale is an agreement b/w a home owner and a bank to allow the home to be sold for less than the existing outstanding loan amount for the home. This occurs early in the foreclosure process. When you make an offer on a short sale, your offer must be approved by both the home owner, and their lender.
How long does a short sale take?
Short sales generally do not close as quickly as regular sales, due to the negotiations that must occur b/w the bank and the homeowner, as well as any other third parties that may be involved (such as tax or mechanic liens placed on the property that must be negotiated as well). Often, a buyer may wait 90 days or longer for their closing, only to find out in the end that terms were unable to be settled upon, and so the sale has fallen through. Because of this, it is our professional opinion that short sales are best for investors or buyers who don’t have a lot riding on the close of the home and who won’t be disappointed if negotiations fall through. Frustration boils down to the how far apart our expectations are from reality.
Will the bank or sellers make repairs on short sale properties?
This is something that may vary between banks and owners, but the short answer is no. Most often these homes are sold as is. The owners are often under financial duress, and unable to make repairs, while most banks do not want to be held liable for any repairs made under their instruction that might later cause issue. For this reason, it is of the utmost importance that if you choose to pursue a short sale as a buyer, you get a good home inspection, either before or after making an offer. Often, short sales may not be the deal they first seemed to be once structural or other major repairs are found and considered.
Do I still need a realtor?
More than ever! Short sales can be complicated and even frustrating; the more experience you have on your side, the better off you will be. Knowing the risks and warnings ahead of time, if you still wish to pursue a short sale property, make sure you use an experienced realtor—a realtor who has specific experience with short sales. They will know the questions to ask, the concerns to raise, and can give you good advice about the short sale process, expectations, as well as insight on the current/future value of the property. They can also prepare you further for challenges that you may encounter along the way. Should you want to pursue a short sale, The Jim Mills Team has the experience to make this a smoother process.