You have done your homework and decided that you are fine with purchasing a “short sale” or pre-foreclosure. You are in no real hurry to close on the house and are more interested in finding a great “deal”. Before you make an offer on a short sale, consider the following issues.
- Short sales are sold “As Is”. The homeowner is usually behind on their mortgage payments and is not in a position to make any repairs on their home. The home may need maintenance type repairs such as heating and air servicing or it may need more substantial repairs such as new carpet, paint, siding, etc. Either way, the homeowner will not make any repairs to the home. On the other hand, the lender is already loosing a great deal of money in accepting less on the home loan than is owed and will not absorb any more losses by making repairs. If the home is in need of major repair – it may not pass an FHA inspection which will affect the type of loan the buyer will qualify for.
- The home may be vacant and the utilities turned off. This may create a problem for the buyer because the owner may not be in a position to turn the power back on due to past due bills or having new service at another residence. In this case, the buyer will have to be in a position to turn on the utilities in their name if the utility company will allow this.
- The lender may not contribute to the buyers’ closing costs. The bank may review the file and determine that they will lose too much by paying closing costs. Hopefully the listing agent will know what the bank is willing to pay in advance but this is not always the case.
- Do not low ball with short sales. Carefully review the area comparables and make a competitive offer. Banks can take up to 3-4 months to review the file and make a decision to accept or reject an offer. As a buyer, you don’t want to wait this long only to have the bank reject your offer because it is too low.
- Finally, make a “clean” offer. Avoid all contingencies when making an offer on a short sale with the exception of the appraisal contingency. Have your financing in order, make a good solid offer and be prepared to wait for an answer.