Before getting involved in the shortsale process, the process will go smoother and without as many disappointments for buyers if they are fully aware of the risks that come with these transactions. First, short sales come with the potential for rejection from the lender. Lenders are working to minimize their loss. Buyers that make their offers too short or buyers that ask for contingencies will often be rejected. Lenders can also make counteroffers, making the process even longer.
Bad terms are another risk that may come with short sale transactions. Sometimes a lender will decide to approve the transaction, but they may require that the seller agrees to repay the difference between the loan amount and the sale price. Sellers that are financially desperate may not find this option acceptable, which may lead them to back out of the shortsale. Terms in the contract that has been negotiated may be changed by the lender. This change in terms may not be agreeable to the buyer, which could lead to the buyer backing out.
Another risk to consider is that no repairs or repair credits will come with a shortsale property. The property will probably be sold “as is” by the lender. Since the lender is already taking a loss, they rarely agree to add repair credits. This means that buyers will be responsible for repairs.
Although these risks can definitely be overcome, to avoid any disappointments or surprises along the way, buyers should be well aware of these risks before deciding to pursue a short sale purchase.