You may have heard of the term short sale, and although you may be aware of what one is, do you know the truth about them? How are these different from bank owned/foreclosed properties? Your short sale questions, and common misconceptions, answered below.
A homeowner is ‘short’ when the amount owed on his/her property is higher than current market value. A short sale occurs when a negotiation is entered into with the homeowner’s mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total value of the mortgage.
You are a home buyer: There is a common misconception out there that all of the “good buys” are short sales and foreclosures. Once in a while people say “I want to only look at short sales and foreclosures.” When we inquire why, the person usually says something in the vein of “everyone keeps talking about how good of deals they are, since people are losing or have lost them.” Short sales and foreclosures can sometimes be priced well, but so can regular / traditional sales (not a short sale or foreclosure). Here are some things home buyers must be aware of if they are considering even looking at short sales and foreclosures:
– The Possibility of Additional $$ Needed Upfront: A short sale or foreclosure may be priced somewhat aggressively, however, they are sold as-is. As-is doesn’t necessarily mean that there is always something wrong in the home, but it means that you are purchasing the property in the condition in which you view it, without any repairs or similar. This means that the seller is not held responsible for anything. If there back assessments and/or back taxes or city code violations, the seller might pay some of these (this is rare in our experience), but the buyer is most likely responsible for those as well as a survey, termite inspection and/or inspection issue repairs. However, while the bank is not liable for these, the bank realizes that there may very well be some issue with the home and allow the buyer(s) to have a home inspection and the opportunity to walk away from the transaction if the repairs, back taxes, etc. are too costly for the buyer
– Timing: Short sales can take time, usually at least 60 days, for lender approval. You can have your offer accepted by the seller and submitted to the lender/bank for approval, but it is a waiting game, in the meantime. It is not uncommon for some buyers to get sick of waiting and pursue other properties instead, walking away from the deal. Foreclosures are a little further along in the process, as they are owned by the lender only (and not the original seller). If you are looking to move quickly, a short sale property may not be the best option for you.
– Must Be Non-Contingent on a Sale: If you currently own a property and would have to sell said property to purchase a property, short sales and foreclosures are not an option for you. The lenders require non-contingent on a sale buyers.
Consider all of your options when looking for a property. Don’t just limit yourself to one thing or another. If you are looking for a “good buy,” remember, there are many properties (regular / traditional sales) that are priced extremely well (without the wait, the back assessments, back taxes, etc.)
Are you a home owner wanting to explore all of your options to move on with your life? Contact The Glockler Group for more information, stay tuned for our second edition to this post.
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