These days, when few are unscathed by the economic downturn, many are still holding out for the dream of homeownership. The downside is that there are far more seeing their dreams upended. Properties, which were once solid investments, are now becoming under-appreciated financial burdens—enter…the short sale.
What are short sales? They are housing pay-off alternatives where a lender agrees to accept less than what it due for residential loans. In these instances, the lender loses an investment profit and the original buyer can face the ruin of their credit. Although it may not be a painless alternative, it is not a bankruptcy or foreclosure.
So what does this mean for the today’s buyer, still looking for their piece of the dream? What it means is careful treading in a tricky market. Short sales don’t follow a traditional purchase trend, so you’ve got to be knowledgeable before you ‘step into the ring’. Although there are many cautionary considerations, short sales can be way into the housing market for new or seasoned buyers. There are a few things to consider as you prepare:
1) Don’t just rely on your realtor; You may want to consult a real estate attorney or a tax professional, familiar with tax consequences that are typically associated with short sales
2) Make sure that you speak directly with the lender—be sure the seller has been approved to do so by the lender. Lenders make the rules and can change contract conditions at a moment’s notice, and many times without proper notice for potential buyers.
3) Lenders are realistic, and have clear ideas about the value of the home and may chose to hold out for a buyer who submits a higher offer. They may even see greater value in allowing the home to foreclose.
4) You’ve got to be prepared to take possession of a home in its current condition, despite home inspection reports and home protection plans. They are all inconsequential to a lender looking to recoup losses.
5) Be prepared to wait…and wait and wait. Short sales, like foreclosures are a paperwork nightmare and lenders are not always as motivated to move them along…remember, they are still facing a financial loss
In the short sale buying game, the buyer wields the least amount of power. Houses might be listed at one price to attract buyers, but are rarely the price that a seller will accept as an offer to present to a lender. You’ll need a experienced realtor who has weathered a storm or two in the short sale world. These short sale veterans will be great assistants in creating a realistic and market-conscious offer that will be suitable for the lender and keep dreams alive for those still desiring homeownership.