What You Need to Know About Short Sale Homes
How to increase your chances of buying a distressed property.
Short sale properties are distressed homes where the homeowner is behind on mortgage payments and facing foreclosure. To avoid losing the home through foreclosure, homeowners may seek a buyer to purchase the property. When the seller lists the home for less than what is owed on the mortgage, that “shortage” represents a short sale. If you’re searching for a discounted home, a short sale can be an option for you. However, many short sales take a long time to complete and will oftentimes fail. We’re going to look at what steps you can take to increase the odds that a distressed property will be successfully acquired by you.
Check Neighborhood Comparables
Comparable home prices or “comps” as real estate professionals call these are homes in a neighborhood that recently sold. Those sale prices can help you determine the value of the home you want to buy, ensuring that you’re not stuck with a home that is overvalued.
You can obtain comps from a qualified real estate agent. This person may be the same individual representing the seller or could be an agent working on your behalf. In some cases the professional may be a dual agent or someone who represents both parties.
Liens on the Property
Every home that is being sold short has at least one lien on it. You’ll want to obtain the contact information of the chief lien holder as well as any possible second mortgage lender.
There may be other liens on the property as well. For instance, if the homeowner has fallen behind on his taxes, then the taxing authority will need to be made whole. Some homeowners fall behind on association fees too — in this case the association will also need to paid. The more liens, the more difficult it is to receive approval for a short sale.
Local Short Sales Trends
If there are multiple short sales in your area with some that have successfully been completed, you’ll want to know how much these homes sold for. That information will give you a position from where to place your bid.
Sale information can be obtained from your county clerk’s office. Those sales that are pending is information you may be able to obtain from lenders.
Your Best Offer
Once you determine the home’s value and understand the liens involved, you should have the property inspected. June Fletcher, a staff reporter for The Wall Street Journal advises buyers to seek qualified professionals to conduct home and pest inspections. Homes sell “as is,” therefore you need to know what you’re buying.
You may be tempted to low-ball your offer, but be warned: lenders are already losing out in a short sale and aren’t motivated to deepen their losses. Do your research and present your best offer first. Ask your real estate agent how long you can expect to wait and don’t pin all of your hope on buying just one house.