…by Kiley Black
Those searching for the best housing bargains on the market might consider buying a short-sale property. But there's an important qualification for buyers interested in going this route: They need plenty of patience.
In a short sale, a homeowner's lender agrees to accept less than is owed on the mortgage for the property. It's a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.
Banks have really become aware that short sales are the best way to reduce their losses... when a modification is not an option. The short-sale option also is less damaging to a seller's credit than a foreclosure.
A short sale can also be attractive to a home buyer since the lender will often accept bids on the property that can be 10% or more below the market value.
In general, it takes a minimum of two months to get a response from the bank whether they will accept or counter your offer.
Are the savings worth it to you? Consider these five caveats before shopping for a short sale:
1. You'll wait in the dark
Perhaps just as frustrating as the wait time is the fact that you likely won't be privy to details as the deal is progressing. That could mean going months without an update.
Banks are "ramping up their capability for short sales," said Dennis Green, general manager of ForeclosurePoint.com. But it hasn't made the process much easier.
2. Banks will make you a deal, but within reason
There are deals to be found in short sales -- but don't expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently. The misconception is that banks should be happy to get it off the books, but offers need to be realistic.
Homes that have already been foreclosed on may be even less expensive than a short sale. But bank-owned properties also might be in worse shape, especially if the foreclosure home has been sitting vacant for some time.
3. Sales are 'as is'
In a short sale, it isn't likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale. Do a home inspection and know what you're getting into, but remember that your bid is for the property "as is."
4. Have a back-up plan
Even if you decide to bid on a short-sale property, it might be best to keep looking anyway.
There is no guarantee with short sales, and if the buyer is smart they will put an offer on a short sale they like and continue to look at properties that interest them. That said, when a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home.
5. It's not only about price
You're buying a house to live in. Buy a house you like. Buyers should remain open to properties of all types -- short sales, bank owned and traditional sales -- and compare prices and features.
A short sale is only a bargain if it's a home that you truly want to live in -- not something you're drawn to only because of its low price tag.
Original article on Market Watch