There is a lot of debate among the experts on the pros and cons of a short sale property. On the one hand some will argue that finding a property that is below the current market value creates rare opportunities for first time homebuyers to find a home that they can afford. Others debate the true interest of a bank’s willingness to take a loss on a property that can be resold.
It’s true that the bank may hold all the cards in a short sale property but that does not mean that there aren’t great deals out there to be had. Considering the fact that it is the bank that will be taking the largest hit on the loss of revenue it’s understandable that they’ll want to get as much out of the deal as they could possibly get. Here are a few other factors that you may want to consider if you’re thinking about investing in a short sale property.
Condition of the Property
While the short sale contract does state that it is an “as is” property there is good reason to believe that it will be in much better condition than a foreclosed property would be. Chances are that the owner will still be occupying the property when the sale goes through. In most short sale properties the “as is” is often a result of poor maintenance because the owner has spent his money trying to keep up with the payments rather than on upkeep.
Foreclosed properties on the other hand are often left abandoned and unused for months and sometimes years leaving them open and exposed to squatters and vandalism. The odds of getting a foreclosed property in good condition will often depend on how soon after foreclosure you make the sale.
A mistake that is often made by those who invest in a short sale is to not make their own market analysis. The assumption is that you’re always going to get a great deal on a short sale but that is not entirely true, you still need to exercise caution. Do your own market analysis and determine what is the true fair market value of the property. Banks are already looking at a loss of revenue with the sale of the property so it’s going to be doing everything it can to reduce those losses.
It is clear that while short sale properties can offer some incredible deals on some ideal properties there are also some risks involved as well. If you are serious about investing in a short sale property it is of the utmost importance that you do your homework and evaluate every phase of your transaction.
If this is your first short sale it is strongly recommended that you enlist the aid of a reputable realtor that has experience with short sales but also experience with real estate in that particular community as well. You may have to pay a little out of pocket for their commission if the bank chooses not to but it will be well worth it. Short sales require a lot of time, and paperwork to get to the completion of a deal and a good realtor will be very helpful in helping you get through it all.