One of the most visible effects a turbulent national economy has had on the housing market is the increase in houses and condos being offered as short sales. A short sale occurs when a house, condo or property is sold for an amount that is less than the balance due on the mortgage.
At first glance, it can seem like a perfect method for a home buyer to get the residence they want at a much lower price. It is true that purchasing a house or condo through a short sale can mean immediate savings. Buying any such property still comes with inherent risks and rewards. Negotiating a short sale is a complicated process. There is no guarantee that either buyer or seller will see a positive outcome from a short sale.
What can you expect from a short sale?
Benefits of Buying a Short Sale
A good value. Short sales are sold at less than the market value. The current homeowner is simply looking to cover their debts. Since they are selling based on what they owe rather than the value of the residence, the price will be much lower than the original mortgage.
Favorable living conditions. Homeowners who are forced to sell their property through a short sale are going to take care of the place. Finding a residence in severe disrepair or vandalized is unlikely because the current owners will want to sell it for the highest price possible. Homeowners with delinquent mortgages care about their homes and will keep it in the best condition possible.
Can be resold for profit. It stands to reason a homeowner who buys a house or condo in a short sale, and make improvements that boost the property value, can resell it at a much higher price down the road. This can be a good option for someone who plans to buy a starter home and resell it within a few years.
Potential Drawbacks of Short Sales
Higher cost than foreclosures. A bank is going to want to recoup as much money from the original mortgage as possible. What it means is if buying a short sale property chances are you will have a higher selling price than if you were buying a foreclosure.
A time consuming process. Short sales are anything but quick and easy. Most lenders view short sales as the final option available before foreclosure. They will take their time accepting an offer. It can take as much as six months before the bank decides to accept an offer on a short sale.
Initial offer can be rejected. There is no guarantee the bank will take the initial offer, if it believes a property can fetch a higher asking price. A buyer should be prepared to raise their offering price and expect to receive a counteroffer from the bank.
If a short sale remains an appealing option for purchasing a house or condo, it is important to deal with a real estate agent that is experienced in handling short sales. They can guide you through the process and help you choose a residence that meets all of your needs.
It is also a good idea to keep the search open for other properties. A short sale can provide a good bargain for a home buyer, but it is never wise to put all of your eggs in a single basket.