Property rates are skyrocketing all over the nation — and there are more people hunting for homes than there are homes up for sale.
So, how can you find a property at a reasonable price? One option that you might be considering is the purchase of a “short sale.”
What’s a short sale?
A short sale property is one that is in risk of foreclosure. Rather than simply lose the house to the bank, a homeowner can sometimes cut a deal with their lender to sell the property for less than what they owe on their mortgage. This gets the bank out of the long, convoluted process of foreclosure to reclaim a property that they really don’t want to own — and it can get the homeowner out of their debt.
What’s the problem?
It sounds like a win-win situation for everyone involved — and it can be. But short sales are also fraught with pitfalls, like:
- You have to get the bank to agree to the sale. Normally, you only have to get the homeowner to agree to a purchase. With a short sale, you have to get the bank to agree to your bid — and they may reject your offer, counter with a request for more money or simply ignore you. Dealing with the bureaucracy of a large bank is never easy or quick.
- You have to take the property “as-is.” The seller is obviously in a financial crisis, so you have to forget about contingencies and repairs that you might otherwise ask for with a conventional purchase. That could leave you with unexpected problems down the road.
- You may struggle with financing. The bank holding the mortgage on the property may prefer to deal with all-cash sales — and that’s difficult to do for most people. Plus, your own lender may not be willing to take a risk on a short sale because of the potential for unforeseen problems.
Does any of this mean that you shouldn’t try to buy a short sale property? Not at all. If you fall in love with a place and you see this as a golden opportunity for your family, it’s worth exploring. You just need to be conscious of the pitfalls. Working with an experienced real estate attorney can help you protect your interests.