There are 2 major pitfalls of buying a house on short sale.
1. The length of time involved and 2. the uncertainty of obtaining the lender's approval even after the time has elapsed - once the buyer has made his/her offer and the homeowner has accepted both the price and terms offered, the contracts must be executed by both parties and the "short sale package" is submitted to the bank. This usually consists of the seller's hardship letter, evidence that they cannot afford to pay the mortgage, past bank statements, past due bills, doctors letters if appropriate, etc. During this time, you, the buyer, is applying for and obtaining your mortgage committment. Once the lender has received AND reviewed all of this information and documentation, they will then come to a conclusion as to whether they will approve a short sale. In otherwords, you may have gotten your mortgage committment and waited, possibly for months, and then be turned down! Even if the lender approves the short sale, your mortgage committment may have expired or the interest rates may have risen to where it is no longer possible for you to afford the home.
Additionally, the home is generally sold "AS IS" and although you have the option to have an engineer inspection, the homeowner will not be fixing any defects your engineer uncovers. The good news is that in New York, the buyer does his inspections prior to contract, so if there are defects you would not proceed with the short sale application.
The upside is that the home is usually being purchased below market value and since the homeowners have actually marketed the home for sale they will not "strip" the home of appliances, pipes, etc nor will they destroy the home. They are subject to a standard real estate contract which will contain clauses that the home must be in substantially the same condition at closing as when contracts were signed.
If you have any further questions, please do not hesitate to contact me directly by phone at (516)410-3594 or by email at Arlynn@ArlynnPalmer.com.
Arlynn B. Palmer, ESQ, SRES, CBR, CMS, CNS
Coldwell Banker Claire Sobel
Associate Broker, REALTOR