In these times with distressed properties plentiful and everyone knows it’s a buyers’ market, how can you go wrong buying a short sale? When you look at the listing price and compare the size of the home you think, “How can I lose!” Much like with foreclosures, which I’ve already discussed There are things your Realtor will fail to tell you when they present their “list of Sort Sale Properties”.
First of all how many properties on the list have both a First AND a Second Mortgage. If the previous owner took out a first mortgage and then borrowed more money taking out a second mortgage, you not only have to find a price acceptable to the owner and first lien holder but you also have to get a price that is acceptable to the second lien holder as well. Since the first lien holder needs to be paid in FULL before the second lien holder gets ANY money, The second lien holder is better off waiting until the market improves and they can recover at least some of their money and not write it off as a total loss. The bottom line, the home may be listed as a short sale but it’s not really for sale until the first lien holder forecloses on the property.
Most of the time, the price on the Short Sale listing is a best guess by the Listing Realtor. It does not mean they did any research as to how much money is owed by the current owners of record, it doesn’t mean they received the approval by the bank and it may be a very low price so they can meet and talk to some people like you, that are in the market for a home. After all a Realtor gets paid when they are involved in a Real Estate transaction. It doesn’t have to be the property they listed especially if that property gets them in contact with multiple buyers.
The Bank is not required to respond to an offer in a “timely manner” A short sale is a sale from the current title holder to you, but the bank has a right of review and refusal. Since the bank is not the “seller” the bank is not bound by the time limits shown on the contract. If you think you are going to place an offer on a property and get a response in a week or so you are probably going to be disappointed.
Similar to foreclosures there are wealthy investors out there that are known by the bank as well as the Realtors. When a bank is ready to “dispose” of a property via Short Sale, the likelihood that the investors out there will get notified and have the opportunity to trump your offer are pretty good. Especially if you have a “steal” on your hands. Similar to foreclosures, unless the home has an obvious defect that you can fix in a more economical fashion than an investor can, don’t assume the home has been missed and it’s an opportunity just for you. Chances are there is something wrong that you don’t know about and the Investors don’t want the property, at least, not at the price you are paying.
Has the home had the utilities on the entire time? A relatively new home that is built to “tight building standards” of the last six years, needs the HVAC on in order to stay dry on the inside. If not mold can develop. If it does, you might be able to file a complaint if you find mold in the home but you better find it before you close on the home. After all who would you file your complaint with? The banks not going to assume responsibility they only “Approved the Sale” and the current owner is already tapped out, or they wouldn’t be selling it short in the first place. Your only real remedy would be to cancel the sale and that’s only if you find the mold BEFORE you buy the home.
Lastly, If you believe what you read on the internet, about 50% of the homes built since 2006 have Chinese Drywall. Now I will be the first to admit I think that is a ridiculously high number and totally bogus, but if you do end up purchasing a home with Chinese Drywall through a short sale, are you ready to wait for a class action suit to meander its way through the court system and then, what will you get, some coupons, maybe a check for a few hundred dollars? Good luck fixing your home on that.
If you want a Great Home at a fair price you are better off looking at new construction. Maronda Homes are built with 25% better energy efficiency than homes built just a few years ago. Lower utility bills, peace of mind, new home warranties, with a builder you can trust, all at a price that is competitive with what short sales in the area are selling for. It’s not really a hard decision to make now is it?