Buying a short sale property can help you score a deal while you and your sweetie are merging your lives together. If you live on a tight budget, you might be able to snag a home that fits your needs at a rock-bottom price -- but if you just moved for a promotion and need a property right away to settle down in, short sales might not be the option for you.
One of the advantages of buying short sale properties is that multiple parties receive the benefit of the sale. The sellers get out of a house where they might be underwater on the mortgage loan. The bank gets to sell the house for more than it would have received through foreclosure. The real estate agent gets a listing that is usually easier to work with than a bank-owned property. All of these advantages make it more likely that the parties will work with the buyer so that he can get a favorable contract in place.
Short sale homes might be on the market at a discount, allowing a buyer to get a better deal than buying a home that is not linked to seller financial problems. The bank might get a broker's opinion about the value of the property and then discount it by a certain percentage. A potential buyer's real estate agent should conduct a comparative market analysis to determine the market value of a home to ensure that he is actually getting a bargain.
More Features and Location
Because the price point is lower, a buyer might be able to get a better home than he would otherwise be able to afford. For example, he may get a property with better features or in a better neighborhood.
One of the major drawbacks that prevent buyers from closing on short sale properties is the amount of time that it takes to finalize the transaction. Even if the seller accepts the offer, the bank takes its own time to deliberate the offer. This process may take months to complete. In housing markets in which the number of short sales is high, lenders might be even more swamped, further delaying the process.
Many short sale properties have more than one mortgage. This situation can result in the first mortgage being paid off while the second mortgage may only be partially paid off or completely neglected. The lenders might have to negotiate with each other over the projected proceeds from the sale, and they may not reach an agreement.
Potential Problems With the House
Some short sale sellers have been living beyond their means or have suffered a financial setback. Being financially strapped may mean that the homeowner has neglected necessary repairs or maintenance. Buyers can mitigate their risk by having a home inspection, but since the seller is already asking the bank to accept less money than it is owed, the seller may not have any cash to pay for repairs out of his own pocket.
Samantha Kemp is a lawyer for a general practice firm. She has been writing professionally since 2009. Her articles focus on legal issues, personal finance, business and education. Kemp acquired her JD from the University of Arkansas School of Law. She also has degrees in economics and business and teaching.