A short sale can easily be a great way to get a great deal. But, it can equally be a descent into a nightmare situation. While it’s true this is one strategy to buy a home in a desirable location for a substantial discount, it’s also fraught with challenges. This is due to the fact that it involves an interested third-party — the seller’s mortgage holder. Of course, the very presence of such another player means a whole lot is added to an already complex process. So, let’s take a look at some common short sale pitfalls.
What to Know about Short Sale Properties
Okay, you’ve probably heard the term before and might even know the practical meaning. But, that’s not enough. A short sale is a distressed property, much like a foreclosure. What it means, is the borrower can’t afford to repay their home loan. The borrower therefore negotiates with the mortgage lender or the holder, to arrange a sale for less than the balance of the loan.
“A short sale is the process of selling a home for a price that won’t cover the cost of the outstanding mortgage. It’s a disheartening situation for sellers who find themselves in financial distress, although it can be their only option. But for buyers, a short sale can be a chance to buy a home for below its current market value. As sweet as that might sound, this type of transaction can be far more complicated than it seems, and could even end up costing you more money than a traditional sale.
The problem for you the buyer is, the resident borrower isn’t in charge of the transaction, the bank or lienholder is the one in charge. Which means you must deal with two different parties with two different interests. Of course, this complicates the dynamics of the sale. So, it’s common for these types of transactions to derail. (That’s just one challenge in buying a short sale home.)
Biggest Home Buyer Short Sale Pitfalls
If you are looking for short sale houses to gain a deal and pay under market value, then you should be aware of what lies ahead. Here are the biggest short sale pitfalls home buyers should know about:
- Skipping the home inspection. Even new construction homes require an inspection. This is due to the fact that you need to really be in-the-know. Now, short sales are typically sold as-is. But, this doesn’t mean you don’t have a right to conduct a home inspection.
- Ignoring existing or future problems. Whatever problems are present or might pop-up in the future can’t be taken lightly. Also, don’t rule out the possibility of the current resident taking their anger out at the house itself. It’s common for distressed property owners to vandalize and tear up the house out of spite.
- Paying too little attention to the details. There are a number of legal and insurance details when it comes to purchasing a short sale. Listen carefully and ask questions so you aren’t caught off guard when it’s too late. You need to pay close attention to the details to avoid big time buyer’s remorse.
- Falling in love with a lemon. Finally, it’s all too common for eager home buyers to overlook substantial problems and issues simply because they love the location. While it’s certainly possible to rehab and renovate any home, the cost might be too much to justify the transformation. If the numbers don’t work, it’s best to walk away.
If you are considering buying or selling a home in Orlando, contact us for the latest market information. We’ll also provide you with the right advice about the local real estate market so you make the best decisions.