In recent years, short sales have emerged as an attractive option for savvy buyers. However, you should be aware of both the rewards and risks of purchasing a short sale.
The main advantage of a short sale is that you can purchase a property for quite a bit less than market value. Home owners who are behind on their mortgage payments will often consider a short sale as an alternative to property foreclosure. This means that you have the opportunity to negotiate a low purchase price with the lender, so you can benefit from the reduced price when you resale the home in the future.
One of the main difficulties with a short sale is that you may experience resistance from the lender when making a purchase offer. By definition, you will offer less than the home owner owes on the mortgage, so the lender will incur a loss on the short sale. However, many times, a short sale represents a smaller financial loss than a foreclosure, so the lender may be willing to entertain your offer with a bit of persuasion.
The other big disadvantage to a short sale is the amount of time it takes for the lender to agree to a short sale. Therefore, if you are in a hurry to purchase, you are on a strict timeframe, you should really consider this before you move forward. We have seen short sales take 2-3 months to close. There are also other considerations like inspections, repairs, and seller contributions that would need to be discussed with your real estate agent for clarification if this is a good strategy for you.
Overall, a short sale poses fewer risks than other types of foreclosure or pre foreclosure sales. If you have the time and patience to devote to contacting sellers and lenders to arrange short sales, this can be a valuable and profitable investment.
As a real estate agent, we help both buyers and sellers navigate the short sale process.