Short Sales Test Homebuyers’ Patience

Are the savings worth it to you?

Consider these five points before shopping for a short sale:

1. You’ll wait in the dark. Perhaps just as frustrating as the wait time is the fact that you likely won’t be privy to details as the deal is progressing. That could mean going months without an update.

Banks are “ramping up their capability for short sales,” said Dennis Green, general manager of ForeclosurePoint.com. But it hasn’t made the process much easier.

“Where our buyers have been the most frustrated is the lack of status or information,” Tyler said. Saying “we want an answer by this Friday or we’re going walk … doesn’t make a difference,” Jenson said.

There are reasons for the wait though: A lender could be considering multiple offers. If the seller had both a first and second mortgage, that could also make the process more complicated. The Williamses ran into both scenarios, slowing their process down, and that’s not unusual. The homeowner also has to prove their financial hardship to the lender.

2. Banks will make you a deal, but within reason. There are deals to be found in short sales, but don’t expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently, Jenson said. The offer should be aggressive, but not ridiculous.

“The misconception is that banks should be happy to get the property off the books,” he said. “They are, but to a certain point.”

Homes that have already been foreclosed on may be even less expensive than a short sale, Tyler said. But bank-owned properties also might be in worse shape, especially if the foreclosure home has been sitting vacant for some time, she added. It’s important to consider the cost of necessary repairs before buying any distressed property.

3. Sales are “as is.” In a short sale, it isn’t likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale, Jenson said. Do a home inspection and know what you’re getting into, but remember that your bid is for the property “as is.”

“The seller will not give you a credit for repairs,” he said. “The last thing they will do is make repairs.”

4. Have a back-up plan. Even if you decide to bid on a short-sale property, it might be best to keep looking anyway.

“There is no guarantee with short sales, and if the buyer is smart, they will put an offer on a short sale they like and continue to look at properties that interest them,” Olsen said. It isn’t uncommon for people to find a home they like better and avoid the short-sale deal, Green said.

That said, when a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home, he added. It may take months before the deal closes, even after the offer is accepted.

5. It’s not only about price. “One thing to not lose sight of is that you’re buying a house to live in. Buy a house that you like,” Tyler said. She recommends that prospective buyers remain open to properties of all types - short sales, bank owned and traditional sales - and compare prices and features.

A short sale is only a bargain if it’s a home that you truly want to live in - not something you’re drawn to only because of its low price tag.

© 2009, MarketWatch.com Inc.
Distributed by McClatchy-Tribune Information Services.