Many buyers see a home listed as a short sale and immediately cross it off the list. But if you educate yourself on the process of buying a short sale, you might be surprised to find out it’s not the nightmare-ish experience you may have heard about.
A short sale is when a homeowner wants to sell their property, but they owe more on their mortgage than the home is worth. In order to short sell a property, a homeowner must prove to the bank that they have encountered financial hardship and are unable to pay the remaining balance. If they are approved, the bank will allow them to sell the property as a short sale instead of going into foreclosure, which can be costlier for the bank due to processing fees.
Pros of buying a short sale:
1. You could get a good deal
Banks (and homeowners) are often motivated to find a buyer for a short sale as soon as possible, so sometimes they’ll list the home at a low price so that it doesn’t sit on the market. That means that you can sometimes get a good deal.
2. Reduced competition
Short sales take a while to be finalized, and many house hunters aren’t willing to wait. That equals fewer people you need to compete with to buy the home.
3. It can be less risky than buying a foreclosure
Most homeowners continue to occupy the property while offering their home as a short sale. This means the occupants aren’t as likely to neglect or destroy the property before the sale is final, which can be the case with foreclosures.
While the pro list is exciting, there are also cons to buying this type of property.
1. Short sales can take a long time
Despite their name, short sales are typically not short. The reason is that creditors have to approve the offer in addition to the seller, and escrow often drags on for months.
2. Sometimes it’s not worth the wait
Just because a home is a short sale, don’t assume the asking price is a fantastic deal. The bank is going to try to recoup as much of their money as possible, and will often set a competitive price.
3. The home may require costly repairs
The owners of a short sale have encountered financial hardship, which often means they haven’t done any maintenance or repairs on their home. In many cases, you’ll be able to do a home inspection before committing to buying the property, but if major issues are discovered, there is no option to ask the bank for a concession or a lower sale price to help cover these costs
If you’re interested in checking out short sale properties in the Denver metro area, the first thing you want to do is find an experienced agent who knows the ins and outs of these types of sales. Metrowest specializes in these types of transactions – give us a shout and let’s start the process!