Should I buy a short sale?

Q:  Friends have told me that there are some great deals to be had right now in homes offered as a short sale.  What is a short sale? Should we be wary of one?

A:  In a short sale, a buyer pays less than the amount a seller owes the lender.

There are more cases of ‘short selling’ in markets where home values are dropping as in many areas of the country today.

Typically, when a homeowner can’t pay his mortgage because he has suffered some sort of hardship — loss of a job or divorce for example — he simply sells his home.  But when home values are dropping, this can be a problem. In some cases, a homeowner might find he owes more on his mortgage than his home will sell for.  In these cases, lenders will be asked to accept less than the amount owed on the home, assuming the homeowner doesn’t have other assets that can be sold to make up the difference. The lender then doesn’t have to go to the expense of going through the foreclosure process.

The question you have to ask yourself is: Are you really getting a great deal?

If the house was purchased at the peak of rising home values, then the homeowner might have paid a premium price for the property.  Since values are dropping today, the lender may not be able to discount the value to a price that is attractive.  It is important to do your homework and compare the true current market value to the price offered.  In most cases, you may be able to purchase the property at a discount from the current market value if the lender (or lenders) agree and there are no other liens or encumbrances on the property (taxes, HOA fees, mechanics liens, etc.)

Probably the most important thing you can do if you decide to purchase a short sale is to team up with a Realtor that is experienced in short sales and can find out from the seller or the seller’s Realtor, the circumstances of this particular sale.  Armed with the right information as well as knowledge of the lender(s) track record, your Realtor can give you a much better idea of the odds for a successful short sale.

If you have the patience, as this can be a time-consuming process, and select good representation, you can expect a very good deal when pursuing a short sale.

For more information, visit our website or call us at (772) 888-2885.
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