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"I've been primarily looking at short sales and foreclosures. I want a really great deal". This is usually the answer that I get when I ask a client what they are looking for. It's true, there is no shortage of short sales and foreclosures to look through, though the inventory in this area is decreasing a bit. However, what most buyers don't realize is that their "good deal" may come with a good deal of headaches. Here are three things you should know before you jump into the deep end of short sales.
PROPERTY CONDITION may not be exactly what you'd expect it to be. Though a short sale typically means that the seller is still living in the home and taking care of it while they are trying to figure out a way to avoid foreclosure or find a way to keep their home, that is not always the case. These homes can be heavily damaged and sometimes completely emptied out. I don't mean belongings, I mean outlet cover, lights, cupboards, trim, you name it I've seen it taken. Though it is not always the case, if a picture was taken 6 months before you are seeing it, chances are the inside looks much different now. If the home is vacant and no longer being care for it can cause major problems with the home. Regular care and maintenance, using the furnace and air, keeping circulation going through the home and things like that keep a house in good shape. If these things are no longer happening you may run into some pretty major problems. Since property disclosures may or may not be provided, a thorough home inspection is always highly recommended.
PATIENCE IS A VIRTUE and that has never been more true than in the case of a short sale. If you find a home that is listed as a short sale that may not mean that they have lender approval. In order to do a short sale you typically need to be 3 months (90 days) in arrears on your mortgage payment. Most lenders will not allow you to submit documentation for short sale permission before this takes place. You also need to understand that even though you are negotiating with the homeowner, they bank has the final say. If the homeowner accepts an offer, that does NOT mean that the bank will. You could wait 3 months or more to find out that they will not accept your offer and your quest for the home starts over from square one. Short sales can be a great deal for those with cash and a whole of patience. It can even be a great deal for those who are obtaining financing and are not looking to close sooner than 3 months. Don't get me wrong, there are short sales that go quickly and smoothly but they are few and far between and are almost always lender approved before they are listed. My advice, expect the best but always be prepared for the worst and have a back up.
BE CONSIDERATE of the fact that the homeowners may not want to leave their home. Yes, a short sale typically puts the scent of desperation into the air and most buyers smell it right away, however, there is still a seller there who is struggling on the other side. It may be through no fault of their own that they are forced to sell their home. You never know the situation on the other end and it always best to be considerate and understand that there is not as much negotiating room as you may think there is. You will be surprised how far you get when you show a little bit of care and understanding.