A short sale, or pre-foreclosure sale, is a property that is being sold for less than what the owner owes on the mortgage. In a short sale, the seller does not have the money to make up this difference, and the bank has agreed to accept less than what is owed. Short sales are different from foreclosures as the owner still has the title to the home and hopes to avoid the credit damage that a foreclosure guarantees.
If you are considering buying a short sale, keep in mind the transaction is very different than buying a regular home. Short sales come with many potential pitfalls for buyers because you are not just negotiating with the seller, the lender must also accept your offer. Here’s what you should keep in mind.
Understand what you are getting into.
A short sale takes a long time to close and you may be waiting for months to hear if your offer was even accepted by the bank. If you’re in a rush to move out of your current place, a short sale probably isn’t your best option.
Not all short sales are great deals.
While the property may be listed at a steal, this does not mean the bank will accept the list price. The property may also have hidden damage. When the seller is in financial trouble, they don’t always keep up on property maintenance or even day-to-day responsibilities.
Work with a real estate agent who has experience with short sales.
Your real estate agent in downtown San Diego can help you make sure you aren’t wasting your time by finding out why the seller is attempting a short sale and performing a comparative market analysis.
Don’t skip an inspection.
An inspection is an excellent investment when buying a short sale. Get repair estimates for any problems discovered and consider calling specialized inspectors to check for expensive issues like structural damage or termites.
Make a strong offer.
You are more likely to be accepted by the lender if you have a strong offer. While lenders prefer cash offers on short sales, you can still be approved if you have financing in order, a large down payment, and you are willing to close at any time. A short sale may not be a good choice if you need to sell your current place first or you have other contingencies.
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