Things to Consider When Buying a Short Sale
For many, short sale properties are a draw for potential buyer because of the lower price they are listed at. But before you choose to make an offer and invest in a short sale property, here are some things to watch out for.
First off, “a short sale occurs when a property is sold at a price lower than the amount the homeowner owes on mortgage, and the homeowner’s mortgage lender(s) agrees to the “short” payoff. A lender might accept a short sale with the property worth less than the balance of the mortgage, if the borrower cannot continue to make the monthly loan payment, does not have enough money to pay back the full balance of loan and needs to move out of the property.” Freddie Mac
Inspection Issues – don’t ignore inspection issues, or skip the inspection all together! Often times, the property has been neglected to some extent due to the fact that the previous owner(s) were unable to keep up with the costs of paying for the property. Being meticulous with inspections and researching potential property issues will help set you up for success rather than becoming overwhelmed with issues after you have completed the purchase.
Potentially Longer Closing Times – Short sales are much different than a regular purchase. There are a lot of rules, paperwork, and time involved so if you are in a rush to buy a home, a short sale is most likely not the way to go. Often times, the process and closing of a loan on a short sale home will take significantly longer than a more common transaction.
Prepare for Needed Improvements – In line with being mindful of inspections, be prepared to invest in and spend the time making necessary improvements to the property before moving in. Not all properties will be move-in ready due to the circumstances and will need some work.
Talk to your mortgage professional today for more information on purchasing a short sale and making this investment if it is right for your specific financial situation.