A short sale occurs when someone sells their home for a lower figure than what the homeowner owes on the mortgage. The mortgage lender or bank agrees to let them dispose of the house at an amount lower than what they owe. While a lender suffers a loss on the deal, for all the parties involved, this transaction is a better option compared to going into foreclosure.
Whereas a foreclosure significantly hurts one’s credit score and causes the bank to lose more money, a short sale is more friendly. It insignificantly impacts one’s credit score and allows the bank to recoup as much money as possible. Besides, it creates an opportunity for potential house buyers looking for a great deal. In that regard, a short sale can benefit both the mortgage lender and the homeowner. However, while there are upsides of a short sale, there are also some downsides.
Below are the pros and cons of buying short sale homes.
Sellers Are Willing To Work With You
With short sales, sellers are keen to work with potential home buyers. Their only hope of avoiding foreclosure depends on the short sale. It is easier to bargain with the seller as a probable new buyer than with a seller looking to get the top dollar in the conventional market.
Easy To Find
Short sale homes are easy to find. You only need to perform a quick search through a search engine. Simply type the phrase “short sales” followed by your local area, and a list of potential property listings will pop up. You can also work closely with realtors to help you find potential sellers.
You Can Secure a Bargain
With short sales, you have a better chance at acquiring a home at a cut-price market value, which is a plus, especially if you’re looking to build equity fast.
You Can Get an Inspection
In addition, you can get a free inspection if you buy a short sale house, unlike when purchasing a foreclosed house at an auction. A short sale is a more secure option because plenty of data points about the home’s condition are available to the buyer.
Short sales take longer to finish, and most buyers are looking for quick deals. It is highly unlikely other potential buyers will develop an interest in the same property. You won’t likely see the prices go up in a bidding war.
The Process Can Drag On
Short sales are not for buyers looking to settle quickly. In this case, you’re not only dealing with the seller but also the mortgage lender. In order for this process to go through, your offer must satisfy the lender. Otherwise, the lender will deny it. This process takes much more time to finalize than purchasing a standard home directly from the seller.
The Home May Not Be in Good Condition
Sellers are reluctant to address anything that is not in good shape, so you must contend with what you get. Unless you get a great deal on the sales price, you could end up incurring more on the home than you want.
They Are Sold As-Is
Contrary to a regular home purchase, a short sale buyer stands no chance to bargain on price in exchange for the required repairs, updates, or even improvements.
Above are some of the pros and cons of buying short sale homes. If you’re planning to buy a home on a short sale, the upsides and downsides as mentioned above can help you to make an informed decision.