We spend a lot of time here discussing short sales and distressed properties. The focus is usually from the Sellers perspective and what needs to be done or what options are available to avoid foreclosure. We’re going to flip the coin and examine it from a homebuyers perspective.
Like everything else, buying a Short Sale has its pros and cons. The big advantage is price. You may be able to purchase the house for a little less than the market value. You may also find the listing agent is eager to accept an offer and submit it to the lender for approval. The bank may come back and refuse to pay for some things which were originally accepted by the seller, but the bank does have final approval. After all, they are absorbing the loss. Don’t expcect the Seller to pay for anything the bank excludes. You as the buyer will probably pick up the tab.
Banks typically may limit the amount of the termite work that needs to be completed and many times they will refuse to pay for a home warranty. You may also find that since it has been listed as a Short Sale, many buyers will avoid it for various reasons.
- uncertainty – no one knows if the bank will accept the offer
- time – approval from the bank can take a few months. Shorter response times are more common, but it can depend on other factors. Have the sellers submitted all of their financial information beforehand or does the bank require it with the purchase offer?
- lenders – how many lenders have to approve the sale? If more than one, is it the same lender or different banks?
- the agents involved – are they familiar with the procedure and have they communicated to and educated their client on the proess? Patience is a virtue.
- your mortgage – since a buyers contingency period begins after written acceptance from the bank, you may not be able to lock in your loan rate for several weeks.
There may also be a misconception that Short Sales are only available “For Sale” in the lower priced homes. As you can see from the homes displayed below, they are available in all price ranges.