A short sale is the process of selling a home for a price that won’t cover the cost of the outstanding mortgage. It’s a disheartening situation for sellers who find themselves in financial distress, although it can be their only option.
But for buyers, a short sale can be a chance to buy a home for below its current market value. As sweet as that might sound, this type of transaction can be far more complicated than it seems, and could even end up costing you more money than a traditional sale.
Before you take the plunge, it’s important to know exactly what you’d be committing to in the event that the lender accepts your offer.
- Time: A short sale can drag on because of a third party like the seller’s mortgage company. While waiting for the sale to move forward, you could miss out on other more secure buying opportunities.
- More Costly: On a short sale, “what you see is what you get”. Keep in mind there is no guarantee you’ll know what the home’s problems are up front. While some banks allow inspections on the home, others might reject any offer that elects an inspection contingency.
- Large Upfront Payments: Banks often view someone with cash as less risky than a buyer who needs a mortgage, so from the get-go, short sales often require larger payment to the bank upfront.
Before you tie yourself up in one of these transactions, make sure you know exactly what you’re getting yourself into. Hire a real estate agent who’s experienced in short sales.