I'm in the market to buy a house. What would be the pros/ cons of buying a house that's listed as short sale?

Question

I'm in Houston and I want to buy a house. I found a few houses that I like and two of them are listed as short sale houses. What does this mean? What are the advantages/ disadvantages of doing this? I don't want to buy until 3-4 months from now, so would a short sale still work for me or would I be better off going the traditional route?

What would be some good questions for me to ask the seller to deterimine if this is a good deal or not?

Answer 1

Short sale means that the previous owner owed more than the property is now worth. A short sale is when a bank forgives a certain amount of the debt to allow a sale to go through (and to write off a bad mortgage).

Pros - the mortgage will not be such a big obstacle in the sale of this house for the seller (i.e. he won't be restricted by what he owes and what he can afford to lose in the sale).

Cons - often houses in which the mortgage wasn't being serviced often have other areas that weren't being serviced. Do a good house inspection - a lot of times when money gets tight, maintenance takes a back seat, and sometimes the owners get angry at their bad investment and take in out on the house.

Besides that, you can find great deals in houses that are short sales. Especially nowadays with the record number of foreclosures. If a person where buying a house at retail value now, and not looking for these kind of deals - then I say they deserve to find themselves upside down in the next couple of years as the market continues to decline (traditionally, the real estate market has a 10 year cycle - so don't buy into the interest groups positive spin that this will all blow over next year, especially when it has been building over the last 10 years).

Answer 2

A short sale means, simply, that the bank is not going to get paid the full amount of they're owed, so they will have to approve any offer made on the home - even if the homeowner agrees to the offer. If the bank says now, then you do not have a binding agreement to purchase the home.

Now, on the good side. Banks are not in the real estate business, and if they think that this is the best deal they'll get (and will save money since they don't have to go to foreclosure) they'll possibly take your offer. It takes sometimes up to 30 days to get an answer from the bank, though, so your time frame of 3 - 4 months may work for them.

See a Realtor to help you through this (not the one representing the Seller) and I wish you the best of luck. It's a little more work, but can reap big rewards for you in terms of buying a home way under value.

Answer 3

A short sale is one in which the lender involved with the current owner agrees that the owner can sell the property for less than is currently owed on it. Short sales may or may not be a good deal. Each one stands on its own merits or lack of merit.

Answer 4

I always advise my clients to have a whole house inspection done, regardless of the type of sale. Short sale are where the lender has agreed to take less rather than foreclose. If you aren't ready to buy any of these house now, there is a good chance they won't be available when you are ready. I suggest you begin your search when you are ready to make a commitment.

Answer 5

the pros, you are most likely getting a property under market value\ with equity, this is really good
check the area, see what the comparable properties(same room, bath, sq fee) are selling for
the cons, since your buying from the bank, most likely as is sale, w\ not much warranty, so do your homework and hire an inspector

Answer 6

just because the owner owed more than it could possibly sell for does not make it priced right. Those hummers and plasma tv's they purchased with mortgage money they borrowed to buy it in the first place will add up.