You’ve no doubt heard about short sales and what a great bargain they can be for a prepared buyer. Banks are in the business of lending money and don’t want to become property managers, so when a property is just sitting there with a lot of money owed on it, it’s costing the bank money daily. In such a case, a bank is often more interested in unloading the property than in the bottom line. So, yes, buying a short sale in can be a good way to purchase a house at a great price. Still, you need to be aware of exactly what you’ll be getting into.
What Is a Short Sale?
A short sale in usually occurs when a buyer is no longer able to make the mortgage payments and is approaching or actually in default. So the property goes to a short sale, and instead of the loan being paid back, the property is sold, often for less then is owed on it.
In 2016, 5.1% of all condo and single-family home sales were short sales because the owners/buyers were experiencing financial distress that made it impossible for them to keep making the mortgage payments. And because they need a fast solution and can’t hold out for a sale price that would cover the remaining money owed, they opt for a short sale. That means the lender agreed to accept a discounted payoff – the short sale – to release the existing mortgage.
How to Buy a Short Sale in
The short sale process is lengthy, sometimes up to a year, and many things can go wrong before it’s finalized. So you need to be informed about the process and the motives of those involved. You should check comparable sales and property values yourself to make sure the sale price really is “short.” A very low advertised sale price may be nothing more than an enticement to reel buyers in. The lender will still have to approve any offer you make.
Be Prepared to Wait
As mentioned, a short sale in can be far more time-consuming and frustrating than a standard real estate transaction. When you make a short sale offer, then, you should be prepared to wait. It’s not unusual for banks to take several months to respond to a short sale offer.
One recommended strategy to speed things up is to give the lender a deadline. Because banks don’t want real estate on their hands, this may goad them into taking action.
Make Sure It’s Lender Approved
Just because you make a short sale offer and the seller accepts it, that doesn’t mean it’s a done deal. The offer still has to be approved by the lender, the bank or mortgage company. In addition, if the owner hasn’t actually gone into default, the lender may not yet be interested in doing a short sale deal. Although many homes are listed for short sale, there’s no guarantee that a short sale in will ever go through to completion. Before you waste a lot of time, then, make sure the short sale is lender approved and at what price.
Buying short sale in can definitely be a good financial move – as long as you fully understand the intricacies of the short sale process and are prepared to wait it out. And the competition is keen because a lot of short sale buyers have cash in hand. Maybe the best advice, then, is to hire or at least consult a real estate professional who specializes in short sales.