Three things to know about buying a short sale
Are you considering buying a short sale? Here are three things you should know before starting the short sale home buying process.
Do your homework. Before you put in a bid on a short sale home, have your REALTOR® find out the home's most recent purchase price, the home's tax assessed value, and for how much comparable homes in the area sold. You could also learn whether a foreclosure notice has been filed, how much is owed to the lender, whether there's a second mortgage on the home or whether multiple lenders are involved. All of this is important because it will help you determine how much to offer on the home.
Keep in mind that if the property is priced below market value, it's likely there will be multiple bidders involved. In addition to putting in your best and highest offer, make your overall bid as attractive as possible. Include a pre-approval letter from your own lender and don't ask for the seller to pay closing costs. Additionally, your offer cannot be contingent upon the sale of your own home.
Be prepared for a long wait. Once the seller has accepted your offer, you will then wait for approval from the lender(s). It could take anywhere from two weeks to six months (or even longer) to get a response from the lender(s). Keep in mind that working with one lender can be easier and less time consuming than when multiple lenders are involved.
If time is not on your side, you could make your offer contingent upon the lender's response by a certain date after which you rescind the offer. But keep in mind that the lender will accept the best offer, so even after you submit your bid, another buyer could outbid you while you're waiting for a response.
Remember the inspection. Remember that with a short sale, you're buying a home "as-is," so it's very important to make the sale contingent upon a home inspection. But even if the inspection points out things that are wrong with the house, lenders typically won't pay for suggested repairs, deferred maintenance or home protection plans. Know what you're willing to accept and what's a deal breaker.
Patience is the name of the game when buying a short sale, but good homes will come to those who can wait.