Buyer Beware: Things Home Buyers Should Look Out For When Purchasing a Short Sale
With the large number of distressed properties available on the market today, a savvy buyer can pick up a great bargain if they do their homework and make the right choices. A short sale (where the lender agrees to forgive some of the debt owed on a home in order to sell before it goes into foreclosure) may seem like a great way to save some money.
But this type of sale involves some significant risks. Here are some important things to take into consideration when thinking about purchasing a short sale:
What Hidden or Additional Costs Will I Incur with this Purchase?
Although a short sale can potentially be a great deal, it can also carry with it hidden costs that can add up quickly. If the seller has no funds, the buyer may get stuck paying costs normally covered by the other party, such as overdue homeowner’s association fees, back taxes, or a site survey.
How Long Can I Afford to be in Negotiations on this House?
Ironically, short sales often take longer than normal sales to close and you could be going back and forth for months with the bank that financed the seller’s original purchase. If you have a moving deadline, or if you have to stay in expensive temporary housing until closing is completed, the savings you’ll have from a pre-foreclosure may be counterbalanced by the expenses you’ll incur waiting.
How Much Can I Afford in Renovations, and How Much Work am I Willing to Do?
In a normal home sale, you have the option to request that the seller make repairs or improvements based on what’s found in the inspection. In a short sale, the home is usually sold “as-is,” so any repairs or renovations would be your responsibility. It’s important to weigh what your budget is and whether the price you will be paying is worth the hassle of fixing up the home yourself.
Although there are many factors that can sour the sale of a pre-foreclosure home, there are certainly plenty of deals out there for the buyer who is willing to look around and make a smart decision. If you are considering buying one of these distressed homes, the most important thing you can do is make sure you use a mortgage lender that is familiar with the pre-foreclosure purchasing process .

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