Deciding to buy property is one of the biggest decisions you’ll ever make. It has many long-term implications and should never be undertaken lightly. The process of buying a property can be mind-boggling as there are so many options out there.
One of them is a short sale home. This is a property that is for sale at a price lower than that which the current owner owes the lending institution.
How does a short sale work?
Homeowners who have run into problems paying off their mortgage loans can often take advantage of a short sale. When they get into a situation where they have no alternative but to contemplate a short sale, the house’s worth is lower than that of the mortgage balance.
The only other option the homeowner might have is going into foreclosure. It’s a win-win situation for the lending institution and the homeowner. The bank avoids having to repossess the house, which is a time-consuming and costly process. The seller can escape without having their credit too severely affected or having to declare bankruptcy.
What are the conditions for a short sale?
The factor that precipitates a short sale is a drop in the house price by at least 20%. The homeowner no longer has equity in the home. However, they have no choice but to continue paying the mortgage. When they can no longer do so, it’s time to get help.
Before the homeowner can contemplate a short sale, the lending institution must approve. The bank is likely going to lose money in the process, so it needs to weigh in on the decision. Documentation must be presented that shows a short sale as the best option for all parties involved.
Should you buy a short sale property?
It sounds like a no-brainer since you’re going to get the house at a reduced price. However, the process is lengthy and requires much paperwork. A short sale can take between two and four months to complete.
As the buyer, you’ll need to have the approval of the owner and the bank. During their negotiations, the bank and the owner set a minimum price for which the property should be sold.
Getting the help you need
As soon as you see a short sale property you’re interested in buying, contact the estate agent immediately. The agent will need to do some research on the property to make sure that all the paperwork is in order. The owner has to supply a lot of documentation to support the short sale.
Those with some experience in buying short sale properties suggest that you, as the buyer, make sure that the agent has some experience. Someone who’s completing their first short sale might not be the best option for you if you want the transaction to proceed smoothly.
You’ll need to make an offer on the property, much like you would at an auction. It is possible that another buyer could outbid you. Your estate agent might approach you to up your bid. You can do so if you have the finances and feel that you have a genuine interest in the property.
As much as a short sale property might seem like a bargain, weigh up the pros and cons carefully. Often, homeowners who have been struggling to keep up with their mortgage payments have not kept up with home maintenance either.
You might need to spend a lot of money on house repairs, wiping out any savings you might otherwise have made. It will also take a lot of time to complete the transaction, so it won’t be an option if you’re looking to move immediately.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate