Home Buying in 91941>Question Details

Dmiles_89, Renter in 27560

Would it be better for first time home buyers to buy a short-sale home or a traditional home?

Asked by Dmiles_89, 27560 Mon Feb 28, 2011

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Hi,

I can speak from my experience as a first time buyer who bought a short sale. You may get a better price, but remember you may also have lots of repairs to deal with. In my case the previous owners were still living here, but they did not keep up with maintenance for a long time before I got in. They also did not disclose known issues. I had an inspection, but the inspector missed lots. The stuff he found I was willing to deal with it. Unfortunately the stuff he did not (all entrance doors hung incorrectly allowing rain to enter, furnace needed new parts, chimney needed to be rebuilt, cluster fly infestation, a wall of mold, etc.) have quickly added up. Even the vinyl fence that my agent assured me I would never have to touch has been coming apart with every strong wind we get. So if you consider a short sale make sure you have plenty of money put aside for all the unknown issues. It's a frustrating process and you may not get what you had hoped for.
1 vote Thank Flag Link Tue Mar 8, 2011
Great question, especially in this market! I included a link to a video I posted recently on things to consider when it comes to resale value...which is a backwards way of looking at what might be important to buyers! I also have a video on how how to buy a foreclosure and some info on the Fannie Mae Home Path loan program, which offers some great incentives for buyers. Good luck!
0 votes Thank Flag Link Tue Apr 5, 2011
It clearly depends on the amount of time you have to purchase and if you have the patience to be able to wait out a short sale. Short sales can take a long time to get approved and your offer is not guaranteed to be accepted, you could spend money on home inspection, appraisal etc and end up losing that money. Make sure you ask lots of questions to the short sale listing agent, has the seller been approved to complete a short sale, is there 1 or 2 mortgages on the properties, is there any offers currently being reviewed by the bank, have any offers been countered or accpeted where the buyer pulled out.

For a complete list of tips and advice on short sales, please see my blog below.

http://www.trulia.com/blog/scott_godzyk/2010/10/so_you_want_…



As far as a foreclosure, you will not want to buy at auction, you should buy a home where the bank has taken it back, cleaned it up, cleaned the title and is now offering for sale below market value. Having a buyer broker experienced in bank owned homes sure does help.

For a complete list of tips and advice on buying a bank owned home, please see my other blog below.
0 votes Thank Flag Link Tue Mar 15, 2011
Thank you everyone to who has replied. I very much appreciate the help. I have kept everything in mind, and hopefully when my boyfriend and I are ready to buy we will make the right decision. We do factor in the area location, and what kind of environment we would like to live in. And although a perfect house would be...well perfect, we are willing to make it perfect instead of ordering it all ready made. :)
Once again, thank you,
0 votes Thank Flag Link Wed Mar 9, 2011
Here in the San Fernando Valley of So. Cal, be prepared to wait forever for a short sale to close -- if it closes at all. And there isn't much of a price differential between short sales and regular sales. Having said that, if you love a home that's being short-saled, go for it!
0 votes Thank Flag Link Wed Mar 9, 2011
Hi Dmiles
A short sale can be a great price, but they are difficult. The first time buyers I worked with almost gave up their dream because of problems and being Out Bid by All Cash investors twice during our time working together. Finally we did find a property for them, but they were pretty tired by the time we did.
So my answer is...it depends upon you. Can you wait 6 months or longer to get a home? Can you handle the disappointments and frustrations of going after this type of property?
0 votes Thank Flag Link Wed Mar 9, 2011
What you should do is buy the home you like. There are many factors to consider when buying a home...the home itself, the price, the neighborhood. Different things interrelate and can make up for deficiencies in other factors. All these things taken together help you determine which one you prefer. You might be willing to pay a higher price because you really like the home or the neighborhood. Or you might prefer to purchase a certain home that needs work or repairs because the price is low. Now, the thing about short sales, they can be a great deal for certain buyers if you like the home but you need to understand that a short sale purchase can be different than a regular purchase. The biggest factor for first time purchasers to consider is that many short sales can take a long time to close because the bank (or banks) need to approve the lower price. Sometimes this happens quickly, sometimes it can take months. This is where having a good real estate agent can make a difference. They can speed the process in many cases, but a purchaser of a short sale (unless the bank has already preapproved the price reduction) should be prepared to be patient. Short sales can have repair issues, but then again so can regular purchases. The main difference here is that many short sales are sold AS IS. All this means is that if this is the case, factor your repair costs into your purchase price and do a thorough home inspection with a professional before releasing your contingencies.
To sum up, a short sale brings some additional complications to the process but has potential benefits also. The home still needs to be evaluated on its own, and you need to factor these potential complications and benefits into your decision of whether to buy or not. Purchasing a short sale has less to do with whether you are a first time home buyer or not and more to do with your individual needs and preferences. Above all though, especially in a short sale, you should find an experienced Realtor you trust to assist you, and preferably they should have extensive short sale experience.
0 votes Thank Flag Link Wed Mar 9, 2011
In a short sale, the buyer loses much of of the protection that a traditional home sale holds. Buyer buys " as is" , and since Sellers angered by the loss of their most valued possession, their home, will destroy as much as they can., Buyer can not hold the bank or Seller accountable, it can cost more to fix than the saving in a short sale. If time is of the essence, there is no guarantee as to the closing date, or even getting Bank approval, and many transactions fell out at the last minute, due to Bank reversing their approval. If this is the only way that first time buyer can afford the new home, go for it, but be aware of the all possibilities.
good luck.
Anna Hershey
http://www.ahershey.lajollahomes@prusd.com
0 votes Thank Flag Link Wed Mar 9, 2011
The better fit, or best deal depends on your criteria. Statistically, short sales may average less price, however that varies from state to state, subdivision to subdivision. Location, Condition and Pricing are top 3 considerations right now for purchasing a home. Don't settle on price, if condition is more than you can handle. Don't settle on condition if pricing is the highest in the market. Try to find a balance...that's the best deal!
0 votes Thank Flag Link Tue Mar 8, 2011
With a Realtor with experience either one. The short sale most likely better price.
0 votes Thank Flag Link Tue Mar 8, 2011
I would say that it depends on the condition of the property. Most short-sale properties are sold "As Is" because the sellers do not have any money to put into repairing and maintaining the property, and the bank will not make repairs either. Since most first-time homebuyers depend upon financing, the property must be in such a condition that an appraiser will give a positive appraisal.

On the other hand, most homes that can be purchased as a regular arm's-length transaction will tend to be in decent condition. There is a seller to negotiate inspection items with as well. I always advise my buyers of the pro's and con's of purchasing a short sale. These properties can be great deals if a buyer is willing to wait longer for the approval, and if the property is in good enough condition to appraise.
0 votes Thank Flag Link Tue Mar 8, 2011
Dmiles_89
It really doesn't make a difference so far as price or terms. Some lenders on short sales can be difficult to work with and the process can be very drawn out. A foreclosure or traditional sale will go faster and more smoothly. If you are looking in the City of La Mesa, where I was raised, they have a special program that can help first time buyers with down payment and closing costs. Not all lenders participate in this program but I work with one who does.
When I worked at the San Diego Housing Commission, I helped develop plans for first time homebuyers and would like to help you with your first purchase. This site is a good way to look for homes in the San Diego area http://www.yoursdps.info

Jerry Heard - Broker
CA DRE #00648687
619-920-9796
0 votes Thank Flag Link Mon Feb 28, 2011
Those are all excellent and true answers. There's a lot of emotion that most people experience when purchasing a home-- and because a short sale takes so long and has an uncertain ending, many buyers who are waiting for an answer from the bank end up continually looking at home after home, and submitting multiple offers, just waiting for one to be accepted by the bank. You can avoid all this time and drama by looking at only equity sales, however, those are few and far between... plus, all the other buyers who are tired of the short sale game are looking at these too, so expect multiple offers. If you're in a time crunch and have to move soon, I would avoid short sales. Either way, here's help on how to realistically get the home you really want:
http://activerain.com/blogsview/1740690/handy-dandy-buyers-m…

Good luck to you---I'm happy to help you answer any other questions.
0 votes Thank Flag Link Mon Feb 28, 2011
The only real difference betweeen these two types of purchases would be the length of time involved. Short sales can take 2-4 months or more. Traditional sales usually close in 30-45 days. If you are in a hurry to buy, then traditional is your obvious choice.

By the way, you should include foreclosed properties in your search too! Contrary to what you may hear in the media, good deals can be found on homes in excellent condition. I would recommend you keep the search wide open in the beginning to make sure you see everything available.

La Mesa is a great place to buy your first home. I should know...having bought mine there 11 years ago and I"m still a resident.

One last thing...the siingle most important step for a first time buyer is talking to a lender. I have two here in La Mesa that I know and trust. Let me know if you would like their contact info.

Dave
0 votes Thank Flag Link Mon Feb 28, 2011
Hi there,

Short sales can be emotionally taxing if you let them, and you may need to come up with extra money in escrow if your lender requires something to be fixed, or the seller's lender requires something be paid to make the sale work, and the seller won't (can't) pay it, or the bank refuses to. They're complicated processes, and things may come up that need to be paid to make the sale work for the seller's lender.

Other than this, you'll end up buying what you can afford, whether it be a short sale, foreclosure or regular sale. It will mainly depend on your budget, and your loan type can also determine which property you'll end up buying.

If you have any other questions at all, just let me know. I work with first time buyers all the time.

Warm Regards,
Cory
0 votes Thank Flag Link Mon Feb 28, 2011
Buy whatever property best suits your finances, wants, needs, lifestyle, etc.; to consider, short sales are by no means fast sales unless already pre-approved by the lender.
0 votes Thank Flag Link Mon Feb 28, 2011
Dmiles,
The problem for the stereotypical "first time buyer" purchasing a short sale or bank owned home is that there are so many issues you may have to confront for the first time beyond just buying a home. Sellers may not do proper disclosure on a short sale and banks don't do any at all. Inspectors may not find all the issues with a house and if they do, neither short sellers or lenders want to do any repairs.
Time frames on both purchases are very ambiguous and uncertain. You'll need to have patience and the finances to move quickly yet keep your current home available past scheduled closing in case something goes wrong.
You may not be a stereotypical first time buyer, so you may be a candidate, but learn all about the process if you proceed so you can minimize the surprises.
One other way to improve your experience is us an agent who is current and responsive regarding short sales and/or bank owned. You need experience on your team.
0 votes Thank Flag Link Mon Feb 28, 2011
My recommendatuion is to find the right house for you, regardless of whether or not it is a short sale or an equity sale if you have the time for the short sale transaction. Short Sales usually take longer than equity sales. With so many short sales on the market, it would not be wise to eliminate them from your search. More importantly is finding the right house at the right price. Using a valued Realtor is important to get good guidance and advice. Maria Weiss
Web Reference: http://www.mariaweiss.com
0 votes Thank Flag Link Mon Feb 28, 2011
Traditional sale. The owners are living in it and are in a good position because it is also not a short sale. You can be more certain the home has been maintained, thereby less chance of unforeseen expenses. Being 1st time homeowners you will have enough expenses pop up that you probably didn't include in your budget. You don't need any more.

Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Mon Feb 28, 2011
In my market, bank owned properties (not short sales) are the best value!
0 votes Thank Flag Link Mon Feb 28, 2011
A traditional sale would be easier, but you can do either. We are having a first time buyers seminar March 15th, if you wold like to come. http://joanwilsonrealtor.com/FirstTimeHomeBuyer.html It's 10 steps to home ownership. You might find the information helpful. Feel free to call and ask questions as well. First piece of advise....work with a Realtor.


Let me know if I can help you in any way!


Joan Wilson (Realtor, SRES, Ecobroker, Certified REO and Short Sale/HAFA Specialist)


California Cool 4 Sale
Prudential California Realty
Direct Phone: 760-757-3468
Fax: 760-946-7894
JoanWilson@prusd.com
License # 01341483

Find your Dream Home:
http://JoanWilson.PrudentialCal.com
0 votes Thank Flag Link Mon Feb 28, 2011
Either is a good purchase as long as the home fits your criteria. Short sales are taking on average anywhere from 4-6 months to complete because the lender(s) need to approve a buyers purchase price. A traditional sale can close as fast as you can get your loan completed. Many short sale properties have deferred maintenance which can be an issue but as long as we complete our due diligence there shouldn't be much to worry about assuming no major issues. Feel free to get in touch to further discuss what you would like to do.

Best,

Marcell Zamora
Cell: 619.985.3785
Email: marcell@sdupsidedown.com
0 votes Thank Flag Link Mon Feb 28, 2011
I wouldn't say one is "better" than the other. However, short sales can be very complex, can take a long time, and, you may not even end up with the home. I would buy the home that is "the one" for you, whether it's a regular sale, short sale or foreclosure. If you find a short sale that you absolutely love, be prepared for lots of ups and downs. It's definitely not for the faint of heart. Good luck!
Web Reference: http://www.sallygrenier.com
0 votes Thank Flag Link Mon Feb 28, 2011
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