If you want to purchase a home in a specific neighborhood but find that many homes are at the top of your budget, an alternative is to purchase a short sale. A short sale property is a home where the current owner owes more than the home is actually worth.
To sell the home, the owner will have to bring money to closing or get the lender to accept a price that's less than what the owner currently owes on their mortgage (hence the name "short sale"). Here's what to expect if you're interested in purchasing a short sale.
The Process Takes Longer Than a Typical Real Estate Transaction
It's common for the process of purchasing a short sale to take much longer than a typical real estate transaction. Most of the time, a normal real estate transaction can close in a month or two. A short sale may take between three and four months before the deal can close.
The reason it takes so long for a short sale to close is that the owner's lender must approve the sale. Remember, the bank is losing money on the sale because they're accepting a price that's lower than what the owner actually owes.
An offer for a short sale may need to be viewed and approved by numerous individuals before it receives final approval. The seller also has to procure approval from the lender to even sell the property as a short sale; this requires paperwork that demonstrates some type of financial hardship and another waiting period.
If a lender has a lot of customers trying to sell their homes as short sales, they may have a stack of offers to review and process. You can expedite the process a little bit by having your financing in place before you make an offer on the home.
Short Sale Homes are Usually Sold As-Is
A home sold as a short sale is typically sold as-is. Remember, the lender is acting as the owner of the home in the transaction. They're usually not willing to tackle a lot of repairs or make a lot of upgrades to improve the home. Make sure that your offer price for the home reflects its current condition.
Though you can make your offer contingent on a home inspection, don't expect the lender to fix any of the issues noted by the inspection report. You'll have to use the info from the inspection to determine if you're satisfied with the home's overall condition.
Talk with your real estate agent for more information on how to proceed with these types of sales.