Short sales and foreclosures are often confused for each other. However, they are very different. To explain it simply, short sales are the step before foreclosures. They occur when the money owed on a house is more than the current market value of the house. However, once the home is sold, the seller isn’t necessarily alleviated from any debt that they have towards that home. Short sales are more often than not used as alternative to foreclosures because they help keep down additional costs and fees for both the seller and creditor. They do often result in a negative credit report again the seller. These short sales are often put on the market at lower prices, which make them more attractive. Below is a list of some common mistakes that buyers can make in the short sale process.
- Falling in love with a bad home
It is a great practice for buyers to consider the potential that a home has. However, sometimes this can cause them to bite off more than they can choose. Although short sales have lower prices, the additional repairs, house condition, and future market conditions all need to be taken into account. Think of it this way, if you buy this home, would you be able to rent it at a higher or the same price as your mortgage payment?
- Ignoring issues with the property
Sellers of short sale homes are usually more motivated to sell the home and repair their credit than they are on fixing any problems with the house. A good rule of thumb is that houses that are between 15 to 30 years old usually need expensive maintenance that hasn’t yet been performed. This also shows that skipping the home inspection should never be an option no matter how attractive the price is.
- Leaving too little time
Short sale homes don’t always close as quickly as traditional homes do. Lenders and banks all have to sign off on the selling price before the home is actually able to close. Additionally, legal or insurance troubles also cause longer closing times. These types of homes are usually sold on less information. All short sale buyers should make the extra effort to investigate if the home is correctly zoned, previous insurance prices, and whether or not permits are required for renovations.