If you are a first-time homebuyer and looking for a deal, you may be interested in purchasing a home that is listed for short sale. Prior to looking at a short sale home, as tempting as the possibilities of home-ownership may be, you should familiarize yourself with these helpful tips, as very often what may seem like a great deal will end up costing you time and money.
Before You Start to Shop
Before you begin searching for your first home, there are a few steps you should take. First and foremost, you need to figure out how much you can afford in a mortgage payment. Additionally, you should get pre-approved for a mortgage. Both these steps, in addition to others listed on the U.S. Department of Housing and Urban Development, will help to ease your steps to home ownership.
What a Short Sale Is
A home is considered a short sale when the proceeds from the sale will not completely cover the balance of the loan owed to the bank or lender. A short sale takes place when the borrower can no longer pay the mortgage loan and the two parties, the homeowner and mortgage lender, opts to sell the property below value. A short sale is often a way to avoid foreclosure; thus the lender avoids high legal fees, court costs and wasted time and the homeowner keeps his credit score from being damaged.
How to Find a Short Sale
Homes that are short sales aren’t necessarily listed as a short sale. Just as with other homes on the market, you can find short sales in the real estate listings of your newspaper, online at websites such as realtor.com or zillow.com, or with a listings agent. While the home won’t necessarily be listed as a short sale, if a home has been on the market for more than six months, has been reduced in price repeatedly, or mentions bank approval, there is a good chance that it may be a short sale.
In the present market, where there has been a rise on short sale homes, you may even be able to find a real estate agent who specializes in this type of sale. In addition to knowing the short sale listings, an agent with experience in this type of sale may be able to save you both time and money. These agents understand the ins and outs of the short sale process and will be able to fully educate you not only as a first-time buyer, but also about what to expect from a short sale home.
What to Expect From Short Sale Homes
Short sale homes are very often not in the best condition and require a good deal of work after purchase. If you are handy and good at fixing household things then the purchase of a short sale home is definitely worth looking into. However, if you aren’t handy you should consider the cost of hiring contractors, plumbers and maintenance as more than likely a short sale home will require repairs. If the owner of the house could afford the up-keep and maintenance then the house probably wouldn’t be listed as a short sale.
It is crucial that a home inspector compile a report before the purchase agreement is finalized. If the home owner or lender disagree to this plan of action, no matter how much you may want the home, it is best to move on to another property.
Making an Offer On a Short Sale
While the home owner may be willing to accept your lowball offer, remember that the mortgage lender may not accept the offer. When placing an offer on a home that is listed as a short sale you do have some leverage, but not as much as you might think. The seller will want to minimize his loss and will also first have the selling price approved by the mortgage lender who has a say in accepting the lower price. If your offer is too low, there is a good chance it will be refused.
To place an offer that is likely to be accepted, you should have the home appraised by a party that has no interest in the sale of the house. This will give you a good gage of what you should offer. Remember, both the seller and the mortgage holder want to recoup as much of the cost of the home as possible. If the lender seems to be slowing the process down it is best to move onto another property. Chances are they are hoping for a better offer.