A short sale is a real estate sale that costs less than the original amount of the property. In order for the borrower not to default on paying the loan, they make a contract agreement with the lender to sell the property at a moderate price that covers at least a good amount of the unpaid loan. This means the lender forgives the borrower on whatever amount that is over and above the property’s worth during a short sale transaction. However, as good a deal as this sounds for any buyer looking to preserve some equity, there are certain disadvantages that are associated with buying a property under short sale.
In most short sale real estate transactions, the property is sold “as is” and this may spell trouble to the buyer due to additional costs that a lender may refuse to cater for. When a property is sold “as is”, it means the seller will not be in charge of inspection costs, repair and structural costs, roof inspections, or any other than needs to be done for the property to be in good condition. As a buyer, you end up spending more than what the property could have cost even if it wasn’t under short sale.
Patience is a definite quality for a short sale buyer because the transactions are lengthy and there is the possibility of being turned down after such a long wait. The waiting period can be as long as nine months, during which a buyer’s tax credits and interest rates can be affected. Even if the buyer gets pre-approved for the loan under low interest rates, they may still suffer loss because the time limit given is less than three months or three months at most, at which time the closing transactions would not have come to an end.
Real estate short sale transactions have also been identified with tagged prices that are misleading. Short sale listings advertised with catchy prices are probably a means to getting as many inquiries as possible, but these prices have not been approved by the bank. Buyers need to know that there is no guarantee that a property can be sold with the advertised price until they confront the bank and find out more information.
Obtaining equity is more often than not a misleading drive and imagination for real estate short sale buyers. The reality of this state is the seller is the one losing equity because they bought the house when the market favored buyers but you’re buying the same property during a market downturn, thus the imagined “instant equity”. Create a buying price offer that is likely to win you a home through the bank and not to save you “some money”. That’s what matters during a short sale real estate transaction