5 Things You Should Know About Buying A Short Sale Property Buying a short sale home can be great way to buy a desirable home at sometimes a very affordable low price. However, if the low price tag is the only thing that the home buyer considers when looking for short sales, they will soon find themselves surrounded by a collection of issues that can make closing on a short sale seem like an esoteric possibility. Anyone shopping for a short sale property needs to ask the question, “What is a short sale and what should I expect when buying a short sale home?” The generic descriptions of a short sale is a transaction that occurs when a property is sold for less than the total amount owed on the existing mortgage loan. Selling the property for less than the balance due makes sense for the bank in some situations, like when the borrowers fall behind on the mortgage and have few prospects for bringing the loan current or paying it off. Of course, the lender must agree to the short sale, which in a lot of cases the lender is really not excited to do. This lender may just skip the short sale and just consider the alternative which is foreclosure, which in most cases can maybe even get the lender more money then what they would get doing a short sale and possibly even with less hassle. Below you will find 5 factors home buyers searching for a short sale should consider: 1. The seller cannot conduct a short sale if they have filed for bankruptcy A short sale is considered to be a collection activity; a successfully filed bankruptcy requires that all collection activities must cease. This means that the short sale deal will be a non-starter from the very beginning. Most homeowners don’t know this, and lenders do not always find out about the bankruptcy before approving the short sale, so buyers should ask if the homeowner has filed for bankruptcy up front. 2. Buyers should make sure that the seller has actually defaulted first Sometimes a seller will market their home as a short sale without understanding the process involved. Distressed homeowners will often attempt a short sale before having defaulted on their loans. When this happens, the deal is automatically rejected. 3. Is there a second mortgage on the property? Find out before getting too far into the transaction, because the second-lien holder may not play ball. If the purchase price isn’t enough to pay off both loans, the second mortgage holder isn’t obligated to relinquish its second lien position. In such cases a short sale can be a non-starter. 4. A large percentage of short sales are fixer-uppers If a homeowner does not have the funds to pay the mortgage and keep their home, chances are that they have not been able to afford to maintain it. This means that home buyers are rolling the dice with short sales. Both thorough home inspections and total repair estimates should be done before closing on a short sale. 5. Understand that you could face long waits and a lot of red tape Even after the lender has agreed to it, a short sale must go through a sometimes very tedious and lengthy process that can cause it to take months before the buyer is brought to the table to close the deal. Due to this factor, anyone who is looking to close on a new home as soon as possible should think twice before pursuing a short sale. Buying a short sale is a great possibility for those with the knowledge — and the patience to get the deal done. But knowing all the risks beforehand can help new home buyers avoid a lot of pain and frustration. Before choosing to buy a short sale or any other property for that matter buyer’s should consider talking to a real estate professional who can give them advise and the many options available to these buyers. If you are looking to buy you can start your search here on our website and get the most up to date market information.
