Even though the basic premise is quite simple, theworld of real estate can get pretty complex sometimes.In many instances, homes for sale aren’t just homes forsale, and there is more to it than meets the eye.Sometimes the special circumstances are brought on bythe buyer, sometimes it’s the seller and sometimes thelender. One such instance is known as the short sale.Short sale homes don’t come along everyday, but whenthey do it can be a very intricate situation.
What Is a Short Sale?Basically, a short sale is a situation where the seller ishaving difficulty with the mortgage and wants to sell hishouse for less than the balance remaining.The reason that a seller would request a short sale is toavoid full foreclosure on the home.
Who Benefits?In a short sale, all three participants may stand tobenefit once the deal is done.• The bank benefits because they don’t have to incurthe time and expense of repossessing a house.• The seller benefits because he can avoid any negativecredit consequences of foreclosure• The buyer might end up benefiting by being able topurchase a house for less than market value.
Buying a Short Sale PropertyBuying a short sale property is not like buying otherhomes for sale. In reality, it is like making a traditionalhome purchase, although the bank has to approve thesale so it can also seem like you’re buying it from thebank even though that isn’t the case.The reason the bank needs to approve the sale isbecause they are the ones taking the loss from the salebeing less than the amount owed to them. In a normaltransaction, only the seller would have to approve thedeal.
Buying cont…While you may end up getting a break on the price, youwill likely have to accept the property ‘as is’. Neither thebank nor the seller will be in the position to make anyrepairs, so even with a home inspection you’ll probablyhave to take it in its present state.And since the bank is already taking a loss, don’t expecta reduction in the price if any inspection revealsproblems.
Get Ready to WaitOne quality that really comes in handy with short salehomes is patience. A bank might take up to severalmonths to process and respond to a short sale request.With traditional homes for sale, the wait time can beless than a day if the seller likes your offer. Sometimes,giving the lender a deadline to provide a response canreduce your wait time considerably.
Things to ConsiderHere are some things you may want to consider if youare thinking about buying a short sale property:• In some cases the buyer is getting a house belowmarket value.• in some cases the bank has done a market analysisahead of time and won’t accept anything lower thanmarket value.• in some places, the seller must pay the bank thedifference between what he owes and the sale price, sohis goal is to get the highest price possible.
More Considerations• Unlike many bank-owned properties, a short sale home is less likely to be damaged or ransacked.• It’s wise not to assume that the house is a great deal just because it is a short sale property. Do your own research and analysis to ensure you’re getting the deal that you think you’re getting.
How to Make It WorkHere are some tips for making a short sale work:• Find an agent that has experience with short sales as well as other types of homes for sale.• Make sure your agent is ok working a short sale and the extra work it may entail.• Find out if the listing agent is experienced with short sales. This may speed the process.• Make sure the short sale is lender approved.• Word your offer in such a way that you can back out if you find a better deal while you’re waiting for a response.
ReferencesJohn Procenko Real Estate is a Markham Real Estateagency. For current listings, visithttp://www.procenko.com/. They are located at 165Main Street Markham North Markham, ON L3P 1Y3(905) 472-7155.