The only reason to buy a “short sale” or pre-foreclosure is to acquire the property below market value and save money. Most people think buying short sales is simply the owner trying to unload their home for less than market value for a quick sale. While that is true, the owner is not the only one who can make that decision if they owe more than they can sell it for.
Considering a Short Sale? Remember This
Short sales usually sell at or slightly below market, but in exchange, there are some risks. Buyers considering a short sale either as a home for personal use or an investment property should be aware of several important factors. Here are the risks of buying short sales in Austin.
- Short sales will yield higher prices than REO’s and foreclosures.
- Typically, short sale homes are still occupied by the owner, or sometimes a tenant, so emotional and financial factors influences the deal.
- Obtaining marketable title is the most common risk with home inspection findings and disclosures a notch below in the rankings of risks common to short sales.
Short Sales at Bargain Prices Come with Added Risk
Most buyers expect to get a bargain price on short sales but generally do not understand why. The reason a short sale should sell just below market is because of the risks assumed by the home buyer. The risk is based on a phrase in the contract: “subject to third party approval”. The “third party” is the bank, lender, or investor, whoever actually owns the mortgage loan. They are the controlling party who has decision power. They arbitrarily determine the final price and terms of sale. The problem is the “third” party can make the decision the day of settlement (close of escrow) when the final HUD statement is available. Of course, this creates a panic for a buyer who has all their furniture and belongings packed up on a moving truck when the lender decides not to agree to the sale.
Subject to 3rd Party Approval – What this Means for Short Sale Buyers
No matter what the buyer and owner have agreed to in the contract, the owner’s lender can still refuse to allow the sale, even at the last minute. Prudent buyers who have a back-up place to live in case the closing gets delayed will be in a better position to buy a short sale.
Never Assume, Expect the Worst and Have Patience
Short sales will most certainly be part of the Austin real estate landscape for years to come. Buying a short sale is not for the faint of heart or the “Nervous Nellies”, but they may be a viable option for some Austin home buyers looking to acquire instant equity. If you are still insistent about pursuing short sale properties, let me offer my unsolicited professional advice: Never assume, expect the worst and have patience when dealing with a short sale.
Still Not Scared by Short Sales? We Can Help!
If the long waits, uncertain outcomes and last minute changes don’t scare you, we can help you navigate the difficult process of a short sale. We’ve helped several buyers over the years acquire short sales and can help you too! Check out our Austin Home Buyer Representation Program to learn about who we are and how we work. Then, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.Save
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