Is Purchasing a Short Sale the Right Move for You?
Today, everyone wants a deal. In fact, many real estate buyers expect them in today’s market. In order to get the best “deal” consumers are looking at the distressed and short sale market for their best opportunity.
Unfortunately, short sales are not the best buys for every house hunter.
Here are a few signs to help you find out if a short sale can work for you:
1. You are not working against a clock
The phrase “short sales ” is an oxymoron. Short sales are short because the bank is taking a, sometimes significant, loss and allowing the borrower to transfer the property without the credit and legal implications of a foreclosure.
If you need a house tomorrow, short sale properties should be as far away from their radar as possible. Consumers who can afford a 3-6 month waiting period from the time they write their offer to get a bank approval or denial are much better suited for a short sale.
2. You like change and surprises.
Short sales purchasers cannot be averse to change. This type of transaction is all about change and surprises. Rigid, type-A personality clients are usually not the best candidates for purchasing a short sale.
There is no rhyme or reason for short sale approval/ denial sometimes. The banks make decisions that they feel are in their best interest, sometimes ask for the same form multiple times, and in some cases will send you contradictory forms.
In addition, there are a variety of things that can go wrong and cause you to have to restart the short sale process in the middle of negotiations. These include the bank selling the lien to another loan servicer after the short sale is initiated, policy and regulation changes, and many other changes you can’t predict until you’re working on the transaction.
Flexibility is a virtue when involved in this type of transaction.
3. You are willing and have the funds to renovate.
Short sales may seem cheaper to purchase than most traditional sales and foreclosures, but there is one very important caveat for the purchaser to consider; repairs will be on them. That’s right; most short sales are sold “as-is.”
Many short sales carry the condition that the seller can’t invest any more money into the property. That means, buyers who have loans that require repairs be made before the loan can be issued shouldn’t shop for a short sale. FHA and VA loan products are good examples of loans that may require repairs before lending.
In these cases, if the purchaser or seller bank is unwilling or unable to make the repairs, the deal could be dead.
4. You are willing to wait for a return
A good deal today could mean great profit tomorrow, but “tomorrow” is a figurative term in the world of short sales. Gone are the days of accruing 32 percent price appreciation in 6 months. Purchasing real estate is a long-term investment of at least 5 years. The more focused on the long-term bottom-line a short sale purchaser is, the more likely they will enjoy the outcome of the transaction and future profits.