4 Tips for Purchasing a Short Sale

Purchasing a short sale is a win-win situation for the seller and buyer in most cases. The bank or mortgage holder agrees to accept an offer on property, below the balance due on the loan. The lender, often a bank, has no interest in becoming a landlord or homeowner and agrees to forgive the difference between the purchase price and what’s owed. The sale can be wrapped up in as little as 30 days, but most short sales are completed in 90 days or more. Following these 4 tips can help the purchase start and finish well.

1 – Research Market Conditions First

No matter how much of a “steal” the short sale might appear to be, you have to research the market conditions that impact the property that’s for sale. If it’s so great, the seller would be doing everything possible to hold on to it. However, there are situations where the seller really has no choice but to sell, and the property is truly a good deal. When researching the market conditions, pay close attention to other homes being sold in the same area. Is the trend for home values going up or down based on a seven to ten year average? Are there many other foreclosures and short sales happening at once? If you answer yes to either, then a red flag should go up, and you should keep looking for other opportunities.

2 – Hire an Attorney

A lawyer is a big help when purchasing a short sale, and can spare you the headaches of title research and understanding the legalese involved with closing the deal and signing contracts. You’ll have to pay for their services, and the rates vary based on the location of the property. Find an attorney that will accept a flat fee so that you know exactly what you’ll owe at the end of the process. An hourly billing arrangement is too open ended, and you could find yourself unable to afford legal fees after the purchase.

3 – Know All About What the Seller Owes

To make an offer too good to refuse, you’ll need to know as much information as you can about what the seller owes. Your attorney can research liens on the property, but only the bank and the seller knows the amount owed. Don’t worry about offending the seller by asking the question. Ask their agent, or if they don’t have one, approach the subject in a calm, but direct manner. The lender won’t discuss any information with you because of liability reasons, without written permission from the seller. If you know what’s owed, you won’t make an offer so low, that a bank will say “no” to you purchasing the short sale.

4 – Avoid Major Fixer Uppers

Double or triple what you think it will cost to fix up the property you want to buy when looking at a short sale. If the amount exceeds tens of thousands of dollars, it may not be worth the reduced price being asked for. With homeowners staying in one home for 3 to 5 years on average, you may not be able to complete all the repairs needed before selling it to the next person.

When you consider purchasing a short sale, learn as much as you can about the property. Drive by at night to get a feel for the neighborhood, and schedule a walk through with a licensed building contractor.