I just put an offer in for my first investment- it’s a short sale so I am wondering if there is anything I should look out for- double check before continuing? I’m unfamiliar with how shortsales are different from foreclosures.
Just know it can take a LONG time in order to close on the property, I heard a story someone waited 2 years in order to close. While I think a scenario like this may be rare it will be longer than your typical close.
Hopefully one of the agents knows how many liens are involved....typically with junior mtgs/liens they may want more funds to settle their debt than the first mtg is willing to give up.....which leads to the buyer having to contribute additional cash above the purchase price to settle that junior debt....which means the offer price should have considered that.
If the house needs a lot of necessary repairs (not upgrades) a cost estimate of those should be submitted with the initial package to the lender(s).
One of the major difficulties, when you are pursuing the purchase of short sale property, is the number of players involved. Remember, the owner wants to sell the property to avoid foreclosure because they have fallen behind on a mortgage.
This means that the mortgage lender for the homeowner will play a major role in the transaction as they have a vested interest in its outcome. An offer to purchase short sale property must not only be accepted by the homeowners, but must also be accepted by the mortgage lender for the homeowner and a number of other individuals who are associated with the mortgage lender. The time and complications involved in getting all of these people on the same page as far as an acceptable purchase price goes can be complex and take a great deal of time. The process of working towards a mutually acceptable purchase price for short sale property may take months and months.
A big downside to buying short sale property is the fact that the seller is usually in no position to negotiate contingencies on the purchase. The seller has already been granted a reprieve from the lender and is being allowed to sell the property to avoid foreclosure. Thus, the owner is generally not able or authorized to negotiate contingencies such as covering closing costs. It is also unlikely that the owner will be able to offer up repairs to be made to the home and property prior to purchase. The lender is not generally amenable to having the owner make any contingency offers that would effectively lower the purchase price further. This is especially true if any contingency would lower the purchase price below what the seller owes on the property.
However, short sales can be very worth it, financially speaking. A bargain on a home purchase can be a rare event and one worthy of jumping through some hoops.