When you’re considering whether or not to buy a short sale, it’s important to be fully informed of all of the potential pros and cons associated with this decision. I help a lot of buyers buy short sales and no single transaction is the same – they all have their own unique set of circumstances. However, when you’ve been through enough of these types of transactions, you begin to see underlying trends that each buyer should be aware of. This will be the first post in a multi-post blog series on this topic.
Before I get into these specifics, if you’re completely new to short sales and aren’t sure what exactly they are, click here to read another blog series that I wrote on short sales.
Below are some of the most important things to consider as you decide whether or not a short sale is for you:
How much time do you have?
It’s typical for short sales to take anywhere from 3-6 months to close, and sometimes even longer. This is a long time for a buyer to wait compared to a typical 30 day closing period in a standard home sale. However, depending on your situation, this might be perfectly acceptable to you. For instance, I’ve worked with buyer clients who find their dream home in the form of a short sale while they’re currently locked into a long lease. Waiting for a longer closing period in this type of situation can actually be preferable because you don’t have to pay a big penalty to break your lease early.
The thing to keep in mind here is that even if you wait this long, there’s no guarantee the short sale will be approved. What I mean by this is in short sales, the seller’s lender is taking a loss on the sale of the property, so the lender has to approve the final sales price in order for the transaction to move forward. Often, a lender will approve the sale of the property, but only at a higher price. (Sometimes, the price is not much higher than the sales price originally agreed upon by the buyer and seller, and sometimes it’s a significant amount higher). In such situations, it’s up to the buyer whether or not they want to move forward with the purchase at the higher price. If the buyer decides to walk away from the lender-approved higher price, unfortunately, they find themselves in a situation where they’ve spent the last several months waiting for nothing. This can potentially be a very frustrating experience.
The upside here is that usually short sales sell for under market value, so the way to look at is if you’re able to purchase the home for less than what it's really worth, in a way, you’re being compensated for the time and frustration you had to go through to purchase the property.
Read part the second part in this blog series on short sales here.
If you’re interested in finding out more information on the short sale process, or you’d like a list of the hottest short sale deals on the market in Northern Virginia, call me at 703-462-0700.