In the years following the mortgage crisis of 2008, the real estate market witnessed a rise in the number of low-priced homes available, including both foreclosures and short sale homes. Even today, many of these homes are still on the market, and savvy buyers will often seek them out for their unique bargain potential.
However, short sales come with their own set of complexities and pitfalls. To help with navigating these often-confusing home purchases, we’ll look at a few of the most commonly asked questions from buyers considering short sale homes.
1. What’s a short sale?
Essentially, a short sale occurs when the seller is unable to pay the debts on their home, such as their mortgage, due to some kind of hardship, and is able to reach an agreement with their lender to sell their home for less than they owe. A short sale isn’t the same as a foreclosure—in fact, it’s a way for the seller to avoid foreclosure.
2. What do I need to consider before buying?
There are advantages to buying short sale homes—in particular, they are often a good deal for the buyer, because the seller has priced the home below its actual value. However, there are several factors that sellers should consider when it comes to short sales.
To begin with, know that short sales will usually take longer to close than straightforward home purchases—sometimes much longer—because of the complicated arrangements between buyer, seller, agents, and lenders that must take place before the sale can close.
You should also pay special attention to the condition of the home and the liens on the property. Some homeowners who know they won’t be able to keep their homes may not be particularly invested in keeping up the home’s condition, both inside and out. Also, some sellers may have multiple liens on their property, which can make the short sale process more complex and difficult.
3. Do I need to work with an agent?
In short, the answer is yes. Because of the additional complexity involved in short sales, you should always work with an experienced real estate agent. Among other concerns, an agent will be able to work with the seller and their agent to ensure that the seller has their documents in order and will be able to reach an agreement with their lender.
4. How long will it take to close?
It’s difficult to say with any certainty, but you should expect the sale to take longer to close than most other homes. In some cases, short sales may drag on for months or longer because of the various approvals and agreements that need to be reached. In other words, avoid buying a short sale home if you’re looking to complete the purchase in the short term, or if you’re in immediate need of a home.