Guide to Buying a Short Sale
What is a short sale?
Buying a short sale is often a complicated, drawn out process that sometimes works out in the favor of the buyer. Buying a short sale is similar to buying a traditional property, but the process usually involves much more negotiating and flexibility from the potential buyer. In order for a family or person to even consider a short sale property, the current owner of the property must be facing financial instability. If the current owner is not officially in default, a bank will oftentimes not even consider a short sale.
Dealing with the banks
The hardest aspect of buying a short sale is the negotiation process with the bank or lender. There are three things you want to know about the banks: they will make you wait after you become interested, they will make you negotiate your buying price, and they will normally sell the property “as is.” These points are expanded below:
Waiting
Banks are famous for making an interested buyer wait. Even though the bank doesn’t actually own the property like in a foreclosure, they still act like the owner in a sense. Because the banks will usually sell the property lower than market price, they normally act less interested in the sale. However, when thinking about buying a short sale, a prospective buyer should give the bank a deadline to accept an offer. The measure only works intermittingly, and there is no guarantee the short sale will even go through.
Negotiating the Market Price
In order to convince the bank to reach a settlement, a potential buyer usually has to up their initial offer. Remember, the bank is still at a lost when selling a short sale, and they will try everything to lessen financial loss.
“As Is” Property
A bank will usually sell a short sale regardless of its condition. You may be able to negotiate terms within the contract that state you can back out of the deal if you find considerable problems after buying a short sale. However, if you can’t negotiate these terms and buy the property anyway, the bank won’t cover repair costs.
Although there are many problems when buying a short sale, you can also take a couple of steps to make the process easier. Consider the following steps:
1) Make sure your realty agent has a great deal of experience with short sales. You may find that some agents refuse to handle short sales because of experience they’ve had in the past, but some agents will help you out. They often receive much less commission because the bank is already at a loss, but if the deal is good enough, they may help you out.
2) Make sure you hire a home inspector before you buy the property. If there is considerable damage within the property, you will be left with the repair costs. However, short sales are usually in better condition than a foreclosed property because the former owner of the property is still living there.
3) No matter how great the deal appears, you should always keep looking—even after you submit an offer. Short sales are not guaranteed to go through, so you’ll want to keep your options open.
