When buying a short sale, there are many things to consider. One misconception is that short sales are inexpensive and you can get better deals than on a standard or bank owned property. This is not always the case since the banks still want fair market value for the homes to minimize their loss. Short sales have a higher escrow fall out ratio and many of these failed short sales can be prevented by being prepared upfront.
One tip when buying a short sale is to be prepared for a long time commitment. It is very common for a successful short sale to take anywhere from 3 to 6 months, even after an offer is accepted by the seller. By knowing this upfront, you will save yourself a lot of stress and be able to have a plan in place for your current home. If you are trying to buy a short sale, it is best not to sign any long term leases where you are renting now but at the same time not to give your notice to move to soon.
Another tip when doing a short sale is to have an offer accepted that is not at the top of your budget. The reason that this may be important is because the bank may approve the short sale at a higher price than the seller accepted your offer at. So by not stretching your loan amount that you qualify for, you leave yourself room to negotiate once the banks counter the offer you submitted. Remember, just because the seller accepted your offer, the bank needs to approve it because they are the ones taking the loss. If the bank chooses to accept the lower offer without a counter, then you saved money by not putting in the higher offer at the beginning.
The bottom line when contemplating getting into a short sale transaction is just to have a plan with a qualified Realtor. Short sales can be a great way to buy a home in this market, not specifically for getting a home at below market value, but also to get a home with upgrades that is move in ready. Some sellers are upside down in their mortgages due to equity lines they took out to add features to the home. You may benefit from this by getting the home for a price that is comparable with homes that didn’t have the upgrades added.