So you are looking to buy a home. In today’s market you have a choice of bank foreclosures, regular sales, and short sales. While bank foreclosures are still a big part of the market, right now a large number of homes on the market are short sales. Many realtors advise buyers to steer clear of short sales. Should you steer clear of that short sale?
Cons of buying a short sale
One reason realtors are not showing buyers short sales is that many short sales showing active on the market already have one or more offers on them. The listing real estate agent by leaving the property on the market is trying to get back up offers in case the top offer falls through, which often happens on short sales.
When a short sale is showing as active on the multiple listing service and it actually already has offers on it, it should really be listed as taking backup offers only or it should be listed as pending. These types of fathom active short sale listings are frustrating to buyer’s agents and buyers alike.
Short sales can take a long time for bank approval
Once an offer is submitted to the bank for short sale approval it can take up to six months or longer for the bank to approve the short sale. A short sale means that the homeowner owes more on the mortgage than the home is worth and that the bank must approve the sale and agree to write off the debt or not.
The lengthy approval process for a short sale can be problematic for buyers that are trying to sell their own home and buy at the same time.
Bank may not approve the sale
The bank may not approve the sale. Not all short sales are approved. For one reason or another the bank may not approve a short sale. It could be as simple as paperwork was not in order or it may be that the bank does not want to pay for termite work or homeowner association dues and they want the buyer to pay for those costs.
There is competition
You may be competing against savvy investors. Investors oftentimes know the ins and outs of short sales and know how to structure offers. Investors also oftentimes can wait out the bank approval process whereas typical buyers cannot wait or just decide to give up.
Pros of buying a short sale
Sellers need an offer
The sellers need a sale. Most short sales are sellers that are having a hard time making their mortgage payments, are unemployed, or just underwater in mortgage debt, so they need a sale and prefer a fast sale.
There are bargains
You may get a bargain. Recently a townhome sold in the area for $250,000. It was a foreclosure. About a month later a similar size unit in more upgraded condition sold for $220,000-it was a short sale.
Basically it is the realtor’s job to help buyer’s find a property to buy and educate their clients about the positive and negative aspects of any type of purchase. Even though it is a lot of extra work, realtors should not steer their clients away from short sales. As a buyer, if you have a realtor that communicates with you every step of the way, and you understand what you are up against, you just may be able to find the property you are looking for.