In our previous post, we discussed the truth about selling short sales. Now, let’s take a look at the challenges facing the short sale buyer.
Buy a Short Sale for Instant Equity?
There’s a common misconception that a person can buy a short sale using the “ELF” formula. That is, make money the “Easy, Lucrative and Fun” way. Why – so the thought process goes – because the seller is financially distressed, can’t make the loan payments, and the lender does not want to get the property back in foreclosure. Well, buying a short sale may not be as easy or lucrative or fun as some people are lead to believe. And here’s why.
Why There is No Easy Money in Short Sales
- Many so-called short sales are not attainable usually because the seller cannot clearly demonstrate a hardship or the lender will not accept the price offered.
- Some homes are in such poor condition that they may have serious code violations, may not be habitable and cannot qualify for a loan (Yes, both property and borrower must qualify).
- A Notice of Default has not been filed so a short sale file has not been opened by the lender.
- In some states, the lender may have the right to void the sale for a period of time after closing, which is one of the reasons why the buyer needs an attorney.
Things to Know Before You Make an Offer on a Short Sale
You as the prospective buyer may be wasting your time from the outset when attempting to purchase a short sale. Here are some other things to know before you embark on a short sale journey.
- The outcome is uncertain at best, most short sales do not close escrow.
- Processing time is lengthy with many levels of verification and approval.
- The procedure is legally and technically complex. Use an experienced short sale REALTOR and a knowledgeable attorney.
- Seller may be unresponsive or not sufficiently proactive. Seller must provide all of the information requested by the lender in a timely fashion.
- Seller may not accept the lender’s terms. Lender may ask seller to sign a personal note foe the unpaid balance.
- Lender may not accept the price offered or find the recovery funds insufficient. Lender may believe they can recover more at the foreclosure sale.
- Buyer may suffer an opportunity loss missing another property that might be easily acquired.
Keys to Buying a Short Sale
Keys to buying a short sale successfully are:
- Be patient
- Follow the lender’s rules and procedures faithfully
- Set realistic expectations
- Understand the property and the neighborhood
- Have professional representation
Buying Short Sales Require Tremendous Patience
Are you the impatient type, in a hurry, have a time deadline, need continuous progress reports, want answers quickly without delay, expect a smooth, seamless transaction, then don’t bother making an offer on a short sale home. If you do, I expect you will probably be frustrated, unhappy, dis-satisfied, annoyed and probably unsuccessful.
Thinking of Buying a Short Sale in Austin?
If you’re thinking about buying a short sale in Austin, we can help. We know the process for buying short sales and can help you be successful. Check out our Austin Home Buyer Representation Program to learn more about how we’re different. Then, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.