A short sale has some significant differences from a traditional real estate sale transaction. Therefore, it’s important that buyers and sellers alike are aware of the potential (and fairly common) mistakes and pitfalls that can arise during the sale process.
Awareness of these short sale mistakes can help buyers to avoid a situation where they invest time or money in a property that’s not right for them, while sellers can avoid a situation where they’re stuck in a property indefinitely because a promising buyer fell through.
Consider the following mistakes that buyers may make when buying a short sale.
Unforeseen Property Problems
Some short sales occur while the homeowner is still living in the home, while in other cases, the property owner has already moved out. In cases where this occurs, the home is susceptible to a number of problems such as water leaks, mold formation, infestations or weather damage — problems that would normally be spotted and remedied if a person was living in the property. Some homes are even targeted by thieves and squatters. This can result in some very significant damage — and that’s all in addition to the typical issues that may be present in any given home.
For this reason, it’s important to perform a home inspection, just as you would do with any other property. This ensures that you know exactly what you’re getting into with the property and what the home will require in terms of repairs and upgrades. Many buyers get very excited by the competitive prices of short sale properties, and this eagerness may result in cut-corners. But cutting this particular corner can result in a situation where you end up spending a lot more than expected on repairs and upgrades — a bad situation, whether you’re seeking a new home or an investment property.
Failing to Perform Your Research
Short sales are quite different from a typical property sale, as in many cases, the bank-owned property sells without a disclosure in an as-is condition. This lack of a disclosure can be problematic, as the disclosure may contain some very essential information such as whether the home has undergone un-permitted renovations or whether the home happens to be located in a flood plain. These issues can dramatically impact the value of the home, the cost of ownership and the future salability.
Also, it’s important to determine if the abutting properties are slated for any expansions or additions or other projects that could impact the salability of the property. This is also information that would generally be included in a disclosure. So take the time to visit city hall and perform a bit of additional research before making the purchase.
Failing to Allow Sufficient Time
The timeframe for a real estate sale is always an uncertainty and this is especially true for short sales, so it’s important for buyers and sellers alike to plan accordingly. Any real estate transaction is subject to unexpected delays. And the short sale is no exception. In the case of a short sale, the lender must approve the transaction in order for the sale to proceed to closing.
Historically, lenders would drag their feet during the offer approval process, but new legislation has improved this situation in many regions. Even so, it does take time for the lender to approve the offer and some lenders process a higher volume of short sale transactions than others. So it’s important to keep this in mind when considering a short sale purchase.
Navigating the short sale process can be a challenge, but this is where you can benefit from working with a short sale expert like Kristine Zelazo, better known as the Short Sale Gal! Call Kristine today at 800.664.0616, x802.