A short sale home is one that is typically on the road to foreclosure, and the mortgage holder is willing to sell it at a loss. Buyers can receive some advantages to purchasing a short sale home, such as less negotiation, lower home prices, and the ability to purchase a larger home. Unfortunately, disadvantages also exist, including longer waiting times for lenders to accept an offer, more legal paperwork, and potential damages made to the home. Weighing the benefits against the negatives is necessary to determine which potential short sales make the best deal.
One reason a buyer may want to purchase a short sale home is that the current owner and lender are often looking to make a quick deal. Each party finds himself in a difficult financial situation, and selling the home is typically the easiest remedy. Most real estate agents will list which homes are under a short sale agreement. This makes it easy to shop among the different homes in an area and look exclusively for a short sale home.
When purchasing a short sale home, buyers can expect to pay anywhere from 10 to 30 percent less than true market value for a home. This allows a buyer to purchase a larger home with less money. For example, if a buyer is willing to pay $180,000 US Dollars (USD) for a home, he can shop short sales homes priced between $190,000 USD to $235,000 USD. The buyer can make a bid at his budget and possibly have the lender accept it, especially if the lender is looking to unload the home quickly.
When purchasing a short sale home, lenders may take some time to respond to offers. This can occur more frequently when a home has more than one mortgage on it. Under this scenario, each lender must agree to the short sale offer. Lenders are also typically less active on selling a short sale home at an extreme discount, as the lender will receive the home under a foreclosure proceeding. The foreclosure will return the home to the lender, who can then sell it as desired and potentially avoid losing money on the deal.
The legal paperwork involved in with purchasing a short sale home can also be extensive. This can be both an advantage and disadvantage. The advantage is that mortgage companies may be willing to move quickly and process the home. Other times, the process and the time it takes can be rather extensive, as the home can be tangled in legal limbo. Homeowners living in the home may also be less willing to provide the bank with information, extending the process for purchasing the home.