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Tuesday, March 15, 2011
5 Things You Should Know About Buying a Short Sale Home
For someone looking to snap up a property here are five things to keep in mind when buying a short sale.
1. Short sales are subject to lender approval so don’t plan on getting an incredible deal. The lower the offer the more the lender will lose and the more likely they are to reject it. Lenders may also try to get the seller to stay in the home by refinancing the existing mortgage thereby avoiding all the paperwork involved in a short sale. If there is more than one mortgage on the house then things become complicated as the secondary and maybe tertiary lender need to approve the sale as well. If you can find out how much is owed on the mortgage this will help you in determining what your offer should be.
2. Short sales draw lots of offers so expect some competition. The more offers there are the closer the home price gets to the market value. This is another reason to not expect a great deal. If you can find out how many offers have been put in you can use that to gauge what your offer should be.
3. While a normal home sale can be closed in a matter of weeks short sales take much longer. This is a consequence of the internal regulations lending institutions often have so there is no way around it. Be prepared to wait two or three months until closing if not longer.
4. The value of having agents with experience in short sales can not be overstated. Make sure your own agent has this experience but also find out the track record of the listing agent. Do they have short sale experience? Have they ever closed on a short sale? If not you may want to pass on the property.
5. Get pre-approved. Mortgage approval will help speed you through the already long process of a short sale as will a sizable down payment. Consult a mortgage broker to find out what mortgage loans are available to you.
One final piece of advice. Short sales are often sold “as-is” so make sure to have a qualified home inspector look over the property and know that you will be responsible for any necessary repairs.