What are the inconveniences of buying a short sale property?

Asked by Leonor Rodriguez, Hollywood, FL Sat May 12, 2012

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5
Gregory Dami…, , Pompano Beach, FL
Mon May 14, 2012
Myriad. First and foremost is time. I have had short sales take 2 years!! I think you need to realistically expect 3 months from offer to successful close - UNLESS - you step in the shoes of another buyer that "bailed" or was unsuccessful for some reason. This can drastically shorten the time frame.

Next, in no particular order, you as a buyer should expect to pay fees and expenses you would not ordinaruily have to pay per the contract. For example - the contract may specify seller pays for title abstract, local lien inquiries, association arearages and / or special assessments passed by an association. These items may range from a few hundred to several thousand dollars. Short sale lenders routinely reject such items on the Seller's side of the closing statement. Often your only option as a buyer is to pass on the deal or pay all or part of such fees and costs.

You often have an unmotivated seller. In a "normal" transaction, there are many things that a seller would agree to do in order to facilitate a transaction, from making minor repairs to cooperating with the Buyer in regard to scheduling the closing date. When the seller stands to gain little from the transaction, their motivation to help is also "little."

Your transaction may hinge on the approval of MULTIPLE lien holders accepting less than they are owed. Additionally, your seller may be insisting he/she be release from liability for the deficiencies. All out of your control.

The foregoing is not meant as a condemnation of short sales - you simply must go in with your eyes open and realize it is not a regular deal.

Gregory Damiani
http://www.closingexpress.com
0 votes
Thanks for your advise. I would have considered to buy short sale properties because they are presented as opportunities. Really I didn't imagine how problematic the transaction is.
Flag Mon May 14, 2012
Annette Law…, Agent, Palm Harbor, FL
Sun May 13, 2012
The issues surrounding short sales are nearly limitless. Juan, Joe and Lee make excellent points when considering a short sale.

Statistically, only 30% of homes listed as short sales will sell as a short sale. This means when you will be joining the team that will LOSE 70% of the time. You will have invested time and MONEY into the process and when you end up with nothing, who will you attempt to blame?

Before you choose to enter the "Wild, Wild, West of Real Estate" known as short sales, make sure you understand what you are getting into and accept full responsibility for your decision. Anything can happen and everything does. The result, however, is the buyer loses 70% of the time.

It like signing up to play for the Washington Generals. You know it's pointless to complain when you repeatedly lose to the Harlem Globe Trotters.

The good news is those 30% who succeed in a short sale average a purchase in excess of 15% below market value. Your results may vary.

Best of success in acquiring your new home.
0 votes
Your advise is very helpful for me, a first time buyer. I am trying to understand the nuances of transactions, real state terms, etc. Thanks a lot.
Flag Sun May 13, 2012
Lee Taylor, Agent, Decatur, GA
Sun May 13, 2012
Define inconveniences...

For the prepared purchaser, for the informed buyer inconveniences get mitigated, primarily by one factor: A below market average buy, whenever the sale closes.

If the short sale doesn't close then the lost time and energy is beyond inconvenient. It is maddening.

So, experienced, trained agents have a much higher success rate with short sales. Find one in Hollywood to help you!
Web Reference:  http://Intowninsider.com
0 votes
I am a first time buyer so I don't know much about buying properties. Your advise is very helpful. Thanks a lot.
Flag Sun May 13, 2012
Joseph Finne…, Agent, Bethlehem, PA
Sun May 13, 2012
Short sales (called that because the bank is being "shorted" the money they are owed) should actually be called "Long" sales. I've seen the bank respond in a few weeks and I have had buyers give up after waiting up to 6 months with no reply.

Almost every short sale is sold "as-is". If the appraiser, for your mortgage company, finds a major problem with the home it may stop the sale depending on what type of mortgage you are doing. You, as the buyer, can do the repair beforehand but do you really want to do a major repair to a home you don't own yet? A work around could be to flip to a renovation loan.

Short sales require a lot of communication and paperwork from the seller of the home. Is the seller fully on-board with getting the short sale approved? If a divorce situation, are both spouses going to do what it takes?

I've had two short sales in which the bank countered the offer back ABOVE the list price of the property. This was after both buyers waited over two months for a reply. Both buyers didn't feel the homes were worth what the bank demanded so they walked.

I also had a situation on a property that had two liens (mortgage company 1 and mortgage company 2). Mortgage company 1 approved the short sale but Mortgage company 2 wanted the seller to agree to pay them the full $30,000 that was owed. The seller refused so the buyers had to find another property.

Some real estate agents are making the buyer pay a fee for a Short Sale Negotiation company. This fee can be thousands of dollars. They justify it by stating You, the buyer, are getting a better deal on the home so you shouldn't mind paying the fee.

Having said all of the above, I have had successful sales with short sales and a few buyers that I felt got really good deals.

I hope this is of some help.

Regards,

Joe Finnerty
http://www.lehighvalleyhomesonline.com
Prudential Patt White Real Estate
Lehigh Valley, PA
0 votes
Your advise has been very helpful. I will take it into account. I don't think I will consider that kind of negotiation. Thanks a lot.
Flag Sun May 13, 2012
Juan Vazquez, Agent, Davie, FL
Sat May 12, 2012
Hi Leonor,

I have sold a few short sales but I have lost a few potential buyers also who initially wanted to buy a short sale.
The major inconvenience is not really knowing if the lender will accept your offer to buy. I counsel all the buyers that there will be days and possibly weeks before you receive any word from the lender's negotiator. If you really want to buy a short sale, start saving alot of patience, because you will need it. There recently have been changes to the way short sales are processed through various lenders so the time frame may be less, I haven't seen that yet.
Another inconvenience is that the seller may not be able to repair any items that are found by your home inspector or items needing to be corrected due to your lien search.
These are just a few items that may inconvenience you. do not let that deter you if the home you want to purchase is a short sale. Stock up on the patience and once you get the go ahead from the investor(s) that your offer has been accepted, it usually will flow like a normal home purchase.
Wish you well. Call or text me if you would like any further details.

Juan Vazquez
954-663-3132
0 votes
Thanks for your help. Very well explained. I think I am not going to buy any short sale property. I need it for living immediately.
Flag Sun May 13, 2012
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