Short Sales Don’t Mean Discount
Without really understanding short sales, it can be risky. It may appear as getting a good deal at a glance. Short sales may be profitable to the buyer but there will always be exceptions. Short sales are not discounting.
Real estate professionals might discourage you from acquiring property from a short sale. Everyone makes money except for sellers and buyers. Any real estate professional who has been involved in a short sale that fell apart will lead their buyers elsewhere.
Why Buyers Might Not Want to Buy a Short Sale
Here’s what can make a short sale unappealing:
- Sellers paid too much: This might mean paying to much and not getting enough or even no equity.
- Sellers borrowed too much: Banks are generous when it comes to appreciating markets. They even allow borrowers to over mortgage a house which means the house may exceed its face value.
- Stringent qualifications: Sellers must prove a hardship and submit evidence of the hardship to the lender for approval. Some agents list homes as short sales without ever talking to the lenders or pre-qualifying the sellers.
- Homes sell at market value: Lenders are knowledgeable of the home prices for sure when a lender believes a better amount can be obtained by taking the property in foreclosure over a short-sale offer, the lender may hold it out for a higher price.
- Homes sell “As Is”: Once a mortgage company plunges in a short sale, this is also like paying the closing cost in the transaction. Buyers are asked by the lenders to buy the house in its current condition. Home repairs will be refused usually by the lenders.
- Length of time to close: 2 weeks to 2-month will be the length of time to get a reply from the lender. Depending on when a Notice of Default was filed. It could take anywhere from 2 weeks to 2 months to get a response on a purchase offer from a lender. It will also depend on how many lenders are involved.
- Lenders can change conditions: Some lenders reserve the right to renegotiate the terms of the short sale at the last minute. If the market changes, new laws pass, or new information crosses the lender’s desk, the lender can attempt to change the terms of the contract. Lenders generally have lawyers at their disposal, and ordinary buyers do not.
- Higher buyer closing costs: Lenders seldom pay for miscellaneous. Therefore, you will pay for it yourself. More often than not, lenders will also refuse the transfer of taxes. For specific inspections, you will also use your own money for it.
- Lose control of transaction: A short sale home closing process takes an indefinite time frame. The seller’s lender calls the shots, not the buyer nor the buyer’s lender.
- Little seller motivation: Once a seller knows that the short sale will be having a negative effect on your credit which may mean a foreclosure, there will be a little benefit for the seller to try and give in to a short sale. A seller may buy again a property after 2 years instead of 5-7 years after a foreclosure.