The affordability of short-sold homes makes them popular with buyers, but buying a house in a short sale isn’t as easy as it seems. There are extra steps and paperwork involved, and all of it must be done before closing. If you don’t take care of it, you could end up paying thousands of dollars more for your home than you originally planned. To avoid these pitfalls, make sure to keep these four things in mind the next time you’re considering investing in a short sale.
1) Get your agent to do their research. Before taking a chance on a short sale, you should ask your agent to investigate the mortgage history of the house. You need to know how much is still owed and whether it carries any liens in order to make an appropriate offer.
2) Don’t expect to buy it for pennies. You might be tempted to make an offer far below list price for a short sale, but don’t expect it to be accepted. It’s up to the lender to approve the final sale price of the home, and they rarely approve offers of less than 60% of the list price.
3) You’ll have competition. When you find a short sale listed in the paper, you can be sure that about a dozen other interested buyers in your area will have found it as well. Therefore, you should be ready to get competitive when buying a house in short sale. Ask your seller how many offers the home has received to get a good idea of the price you’ll need to beat. If the house has more than four offers, it’s probably not worth your time.
4) Make sure you work with a short sale agent. Short sales often require a certain amount of haggling on your agent’s end before a lender will accept an offer for them. It’s important that your agent has a proven track record negotiating short sales or else you might not be able to convince the house’s financer to sell it to you.
Short sales are rarely as good a deal as they seem to be, but that doesn’t mean they aren’t worth investigating. If you pick the right agent and the house’s lender isn’t difficult to work with, you might actually be able to settle down in a short-sold home for the price you hoped to pay. If you can’t get an approval for your offer, just walk away. In this economy, there’s always another affordable home waiting just beyond the horizon.