In a short sale, a financially distressed homeowner sells their home for less than the amount owed on the mortgage and all the proceeds go to the lender. Though it is often a more complicated and lengthy process, there are both benefits and drawbacks to purchasing a home through a short sale.
What are the benefits of a short sale for buyers?
- Purchase a home at a discounted price. Though the property in a short sale will be priced at market value, lenders are eager to sell. This means that buyers can usually count on getting a better deal.
- Less competition. Because short sales are a much more complicated process than the typical homebuying process, they attract much less attention from buyers. This means that those who are willing to invest the time, will have much less competition.
What are the drawbacks of a short sale for buyers?
- Time-consuming. Due to the lender’s involvement, a short sale typically takes longer than a traditional sale. If there are multiple lienholders involved, the process will take even longer as they will often take their time negotiating the sale to get the best deal possible. The process can also be delayed if the seller is unprepared with the necessary paperwork or changes their mind.
- Riskier. Because a short sale is sold “as-is” buyers are taking a greater risk to purchase. They are also risking spending time and money on a property that is not guaranteed to sell.
- Requires more work. The buyer must put in more effort when purchasing a home through a short sale. It is their responsibility to discover the market value of the home, the number of lienholders there are on the property, as well as any issues with the property’s condition.
- Property condition. Buyers often end up spending more money on making necessary repairs, as the seller is unlikely to have been paying for needed upkeep.
Are you considering purchasing a home through a short sale? To learn more, contact a VanDyk Loan Originator today!