For homeowners who are “underwater” on their mortgage, short sales are an alternative to foreclosure. A short sale is the transaction in which you sell a property that you own money on for less than the amount you owe to a lender. For buyers, acquiring a home via short sale is a way to do so at a discount, which for some may be the only way they can envision being a homeowner. While it seems like a great way to get a house you might otherwise not be able to afford, there are things to consider before deciding to buy a home this way
Short Sale-Pros for Buyers
Sellers want to Sell - This makes both the homeowner motivated to work with you to get you into the home. The homeowner can’t move on with their own life and the lender receives no money unless you are willing to pay them the asking price, and because the alternative to the short sale is foreclosure, they are for more willing to speed negotiations along.
Better Homes, For Less - As previously mentioned, the main benefit for the buyer in a short sale is that they can afford a house would not normally be able to. This means, for what you would have paid for beat up fixer-upper, you could potentially buy an updated house in a neighborhood that was just out of your price range. Because the current homeowners probably still live there, as opposed to a foreclosure, the property is likely to be in better shape.
Less Competition - Due to the sometimes-prolonged finalization period of the short sale, many buyers would rather not go through the ups and downs of waiting it out, so you are far less likely to enter a bidding war to drive the price up.
Short Sale-Cons for Buyers
The Short Sale is Not Really a Short Wait - Remember, this is all made possible because the current owners are in such financial difficulties that they can not afford to pay their mortgage. This means whatever creditor’s they have must approve the offer and the escrow process can take months to complete!
That Discount isn’t all that deep. - This is not like shopping at the dollar store for name brand toothpaste. Nobody is getting something for nothing, and those who go in looking to buy a mansion at condo prices will be in for a disappointment. Yes, you might be able to consider a home that is nicer than you were expecting but considering the wait and possible disappointment if the sale isn’t approved.
What you see is what you get - Unlike with a regular sale, buyers can’t negotiate repairs. These properties are bought as-is, and again, remember the seller is enduring financial hardship. The home may not have been left vacant to looters and vagrants, but also may not have been kept up with to a standard you might want. As the lender is already losing money, it is unlikely concessions will be made for repairs, which is why you can and should get an inspection.
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