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What does a short sale mean for the buyer?
A short sale might seem like an excellent opportunity to buy property at a reduced price. Short Sales, is a type of foreclosure that has its perks and potential, but it's a more complicated process, especially for first-time homeowners. A short sale is when a property is sold for less than the price still left to be paid in the original mortgage. It's important to know what kind of transaction you are dealing with, and here is what it means from the buyer's perspective:
Waiting longer for the sale
Since this is not a typical home sale, it includes extra steps and negotiations that will increase waiting time. Apart from having to make an offer and wait for the owner to approve it, whoever made the offer will also have to stay on the bank's approval. Only in rare cases, the bank approves it "right away." In most cases, the bank's support might come after they propose a negotiation of the price.
Spending more time preparing an attractive offer
A tip that can help with the waiting process is to spend more time thinking about making an attractive offer, taking both the homeowner and the bank into consideration. This is why it's essential to have a real estate agent by your side to support you with these evaluations. The agent will be able to perform a financial analysis of the area the property is located, and they will also be able to get in touch with the bank to understand better the amount they would consider for the property.
Being ready for a surprise at the first steps of the process
Because of the extra steps and the lender's involvement in this transaction, a short sale can become a lengthy process or fall short for reasons that might not be clear to you beforehand. Sometimes the homeowners place their property for sale too quickly before they are legally in default, and they will have to pull out of the deal once they notice this. Other times, the bank might want to negotiate the price for way higher than you can afford or ignore your first offer because it is too low for what they are looking for. For this reason, it's recommended that you and your real estate agent double-check that the property is short sale approved.
Adding the costs of renovation
Short sales come "as-is" property. Compared to foreclosed properties, short sales are usually in better conditions, but not always. Although the homeowners are possibly still living in it, if they're selling it as a short sale, it means they are going through hardship, and the property might have been affected by that as well. Neither the homeowner nor the lender will offer any repairs or maintenance services, so it's advisable to consider the prices (or time) for any renovations that might be needed in this property.