A short sale house is a house facing foreclosure for which the lending bank has agreed to accept less than is owed on the current mortgage from an interested buyer. If you’re thinking of making an offer on a house in short sale status, don’t be fooled by the term “short sale.” While an interested buyer may think that the home sale will take place within a short timeframe because both the owner and lender want to sell the home before it enters foreclosure, the term “short sale” actually refers to the sale price, which will be short of the amount of money owed on the current loan. Buying short sale houses can actually take longer than a traditional house sale, and the process can often be more stressful for both the buyer and seller.
The biggest advantage of buying short sale houses is that you will probably be paying less than market value for the home. The bank has already agreed to accept less than the seller owes on the home in order to avoid the hassles and costs of a foreclosure.
Buying short sale houses can be a good investment. A buyer with the means to purchase a short sale may be able to resell the house on the traditional real estate market for a profit, often in a relatively short time after making minimal to no improvements to the property.
Buying short sale houses often comes with more cons than pros. Although the current owners may still be occupying the house, foreclosure is imminent. Even if the house is sold on short sale they will receive no money from the sale, since the bank will be taking a loss. Because the owners are not motivated by making a profit on the sale, they often stop taking care of the house and the house is not prepared for sale the way one on the traditional market would be.
The major disadvantage to buying short sale houses is that the bank essentially controls the transaction and will be calling all the shots. As a buyer, you will have little leverage and will likely be unable to negotiate much with either the bank or the owners on the price or other terms of the sale. The home will be sold “as is” and you may be faced with cleaning up the property before moving in, including removing anything and everything left behind by people who just lost their home.
Is Buying a Short Sale House Right for You?
Short sale houses can, however, provide a golden opportunity to the right buyer under the right circumstances. Will your next home be a short sale house?