Buying a house through a short sale is a way to get a good deal on property. However, a short sale can be a complex process compared to purchasing a home on the open market. Before purchasing a home through a short sale, it is important that you understand the process.
A short sale comes into effect when a home owner is unable to keep up with the mortgage payment due to financial distress. The price at which the property goes for is usually lower than its market value. The seller uses a short sale in order to recover some of the money owed to lenders and helps them avoid problems usually associated with a foreclosure.
For short sale home buyers, this is a great chance to own a home at a lowered price. While the process can be a drag, buyers can easily own homes at a price much lower than the market value of the property.
Steps to Follow when Buying a Short Sale Home
Search for Potential Short Sale Homes
The internet is a great place to look for short sale home buyers. Go through different listings and gather as much information as you can on potential homes. Find out how much the owner owes their mortgage lender in relation to its total value. If the total owed seems higher than the property’s approximate value, then this will be a good candidate because the seller will likely find difficulty trying to sell it to satisfy the loan. If the seller owns a lot of equity on the property, then lenders are likely to settle for a foreclosure after which they’ll sell it closer to its market value.
Inspect the Home
Make sure you thoroughly check the house and try to estimate how much it would take to renovate or repair it. If it needs a lot of work, then most buyers will skip it, making it easy for you to bargain on the price.
Research the Market
Figure out how much the home is worth and how much you are likely to get in profit. This is regardless of whether you are an investor or intend to live in the house.
Financing Options
It is critical that you figure out how you’ll pay for the home before you start the process. With an attractive credit score, you may be able to secure a loan with the existing lender. If you’ve provided information for the short sale, the lender will already have your paperwork and may therefore speed up the process.
Seal the Deal
Finally, once you’re satisfied with the terms, get everything in writing detailing all your terms for the short sale. Having everything officially recorded will not only seal the deal but will help you avoid problems associated with short sales.
