Are you sure you want to buy a short sale home?
Well the short sale market is in session and there are a lot of buyers getting very frustrated. It seems no matter what I say; people are still listening to the media telling them to buy foreclosures or short sales.
My goal is not to tell you to avoid short sales like the plague, but to make sure you understand the negatives to the short sale.
First, based on last month sales, short sales are only about 3%-5% lower than regular sales. They are not really much of a bargain. Basically they are selling at market rate. Based on the amount of time involved and the frustration, that savings can quickly be lost.
So why am I so down on Short Sales? The biggest issue is that they are an unknown. I will point a few of the issues below:
1. In most cases, the soonest you will hear if your offer was accepted is 45 days or more.
2. The listing price has nothing to do with the actual price that the bank will accept. The bank does not give Realtors a deliverable price at the time of the listing. The Bank will not give out a price until they have received offers. (Many Agents are using short sales as a means to capture buyers. They list the homes at a price that there is no way the bank will accept the offer, but the listing agent captures many emails and phone calls about that very low priced home. Ethical? I don't think so!)
3. Many buyers are offering the bank much lower than the listed price. The reality is, the bank will be selling that home at very close to market rate. They will do an appraisal on the property prior to accepting any offer.
4. While you are waiting for an answer on your offer, the listing remains active and the bank is usually receiving multiple offers. (This is against MLS rules but since most Real Estate Boards around the country are not sure what to do with short sales, they simply let this rule slide. According to our MLS Rules, they are supposed to be marked contingent while the sale is contingent on bank approval.)
5. When the bank finally does come back with an answer, there usually is no chance for a counter offer; they usually accept the best offer. (That is if any are acceptable at all)
6. The bank will usually turn down most offers that are asking them to pay anything toward closing costs.
7. The bank will usually not do any repairs on the property...they are mostly "as is" contracts. Many of these homes may need a substantial amount of work.
8. The bank still may require the seller to sign a promissory note to pay the difference. So after all this time and potentially at the closing table, the seller may walk away from the deal. At that point you are right where right back to the beginning of your home search.
9. Based on my office stats, less than 35% of our Short Sale offers are approved by the bank. Many of our of
