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The sales price might seem attractive initially, but a short sale involves extra steps, procedures, and waiting. It is recommended that someone interested in venturing into this kind of investment weighs the pros and cons. Here are some Pros and Cons for you to consider in buying a short-sale home:
The Pros of Buying a Short-Sale Home
Prices below market value
Of course, this is the main reason most buyers are interested in a short sale and is the main attraction point. Suppose the transaction goes well and the sale ends up closing. In that case, the buyer can acquire the property for a price significantly below market value.
For the seller, it means avoiding foreclosure
Foreclosure is a process that can affect the credit score of the homeowner. Many lenders require a minimum waiting period for those who want to buy another property. It can range from 3 to up to 7 years. This waiting time will depend on having good credit since the foreclosure. In this way, choosing to sell as a short sale is a smoother process since the effects are less harsh on the owners, and they still have a significant part of the control in the transaction.
Only a few people are interested in buying a short sale, especially first-time buyers. Since it's a more complex and lengthy sale, inexperience or other circumstances lead people to shy away from it.
Better conditions than foreclosures
Since foreclosures are a lot of times properties sitting empty, it is found in worse conditions. They need a lot more repair than a short sale. A short-sale property owner is still living in the property, and it's still usually doing day-to-day maintenance.
The Cons of Buying a Short-Sale Home
The time frame
There are no accurate predictions or dates settled in a short sale. It might take long for negotiations to happen and approvals to be issued. It might only be an option for you if you're flexible.
It can be unpredictable
The whole process might be unpredictable from the lender's side. The lender might counter your offer with a price you can't afford, ignore it, or delay the negotiation process. Some lenders might also change the terms and conditions of the contracts short-noticed.
Lenders will have their interests as a priority
Because it is a property sold for less than what the lender initially granted to the homeowner, they will try as much as possible to recoup their losses. It is where a short sale might not be a good deal if the bank sets a competitive price. It depends on the property, location, and market price.
Maintenance and repair costs are excluded
Expect the homeowner or the lender to refrain from offering repairs, renovation, or maintenance before selling. Although properties are usually in better condition than foreclosures, they are sold as "as-in" the same way. You do a home inspection before completing the purchase.