A short sale is a kind of real estate sale that usually happens when a home is worth less than what the owners owe on it, but they make an agreement with their lender(s) to sell it for that much to cancel the debt. Some buyers see these as favorable, as they can often buy the property for cheaper. However, there are many cons of buying a short sale.
The foremost issue with buying a short sale property is the amount of uncertainty involved. It is difficult to know how your offer will turn out ahead of time. Some sellers say that the property is a short sale, but do not have approval yet. Even if they have been, it is the lender that must accept your offer, not the seller. This is made even worse in cases where there are multiple liens on the property. The offer and split of the money must be acceptable to every lienholder, a process that buyers have little control over.
Length of Time
This uncertainty is made worse by the long lengths of time often involved. While many companies have streamlined their short sale processes in the wake of the financial crisis, it can still take weeks or months for an offer to get approved, meaning the entire process can take months or even a year. If the seller does not already have all their paperwork in order, this can be even worse. You could be waiting weeks or months to hear from the lienholders, only to discover they rejected your offer. This is time that you could be searching for and making offers on other properties instead.
Because the lender is already losing money on the sale, they usually do not give any concessions for maintenance or repairs on the property. Additionally, the sellers are usually under financial hardship and may not have been able to maintain the property. Short sales are normally as-is, meaning there are no guarantees on the condition of the property. This means you will have to deal with any issues with the house after purchase. Problems with the property mean that even after getting through the whole purchasing process, you may be experiencing the cons of buying a short sale for years afterwards. While it is important to get a physical inspection for any property purchase, this is especially important in a short sale.
Because the lender is just trying to make as much of their money back as possible, they usually have preferences for certain offers. All-cash or large down payment offers are generally favorable, but especially so to short sale lenders. These terms make it more likely that the buyer will be able to purchase the property, so the lenders are more comfortable accepting these offers. This means if you’re planning on a conventional, loan-based offer, it may be more difficult.
Avoiding the Cons of Buying a Short Sale
Some of these issues can be mitigated with careful planning and information gathering. If you know about the state of the loans, and how easy the lender(s) are to work with, you can smooth the process. Home inspections can show any problems with the property before you commit to buying it. If you are not in a hurry to buy a property, and can save money by buying a short sale, it may still make sense.
If you’re looking for an agent to sell or buy a short sale in North San Diego County, contact James Jam, the #1 Individual Berkshire Hathaway HomeServices Real Estate Agent in San Diego County. You can reach James by email at firstname.lastname@example.org or by phone at 858-210-0509.