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Buying a Short Sale Home From a Seller with Lender Approval
I want to know if Buying a Short Sale Home From a Seller with Lender Approval is a good idea. I am getting many different answers from family, real estate investors, homebuyers, co-workers, loan officers, attorneys, and real estate agents who supposedly are familiar or knowledgable buying a short sale home from a homeseller with the mortgage servicer and lender’s approval. Frequently asked questions by homebuyers who want to know the benefits and negatives of buying a short sale home from a mortgage lender. Many homebuyers think if buying a short sale home from a lender is a good idea. Many homebuyers are told by real estate agents buyers can buy it at a huge price reduction while other real estate agents are telling buyers lenders are not discounting the price of the home. Is it true that buying a short sale home takes up to one year to close? What things can go wrong buying a short sale home from a seller with lender approval?
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1 Reply
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Purchasing a short-sale property from a seller with a lender might carry pros and cons, but it is tricky overall. Other aspects will be discussed depending on what your questions may be, thus:
Advantages of Buying a Short Sale Home:
Possibility of a Lower Price: You purchase the property at a price higher than the market price. The lender may allow the sale of the house at a lower price than the seller has on the mortgage. For example, if the house is sold in an unsteady market or requires repairs.
Less Competition: Since short sales are usually less popular than foreclosures or ordinary sales, short-sale properties are likely to face less competition as most buyers are relatively more patient due to the long wait period involved.
Possibility of Inspection: Unlike foreclosures, in which properties are generally sold in their current condition, you can view the property and renegotiate the price or advise some changes and undertake them.
Disadvantages and difficulties:
Long Process: Buying a short sale can take months or even up to a year to close. This is because the settlement figure has to be agreed upon by the lender, and a buyer may go through several rounds between the buyer, seller, and lender negotiating.
Uncertainty: The lenders must approve the sale of the property. This does not mean that they will approve the short sale. Lenders may accept offers and then counter offers with higher offers or change the terms on which the offers were made.
No Big Discounts: When considering the cost of foreclosure, some buyers have investors in mind, many of whom expect a big cut in the normal price of the house. All Lenders are interested in recovering all the funds. Some will, in fact, only provide lower face values ranging from five to fifteen percent off the sale value.
Additional Costs and Risks: If the amount offered is not accepted, there may be back taxes, liens, or other costs associated with the property that must be paid. This is especially true with foreclosure sales. Since the house is usually sold in its current state, repairs or remodeling would be out of the buyer’s own cost.
Multiple Lien Holders: Such waiting means that if the borrowers have more than one lender or another lien holder, they must also wait for the Sale approval. Thus, it can create situations where one part of the agreement may be safely sealed while the other cannot, preventing the sale’s approval.
Things That Can Go Wrong:
Lender Denial—Sometimes, after many months of approving and waiting for the offer, the lender may show disappointment by rejecting or asking for a higher offer.
Market Changes: Concerning Home prices on interest rates, as mentioned earlier in the lengthy and timely closing process, it may lead to structural issues in financing because houses or rates might have changed.
Seller Finances: Occasionally, the seller might experience an adverse change in their financial position (for instance, a foreclosure is initiated), which may be an obstacle to or cancellation of the short sale process.
Increased Costs: Sometimes, lenders require buyers to pay certain costs normally taken care of by the sellers. These costs can include repairs, closing costs, and fees, among others.
Buying the property through a short sale process can be a good idea, provided you are patient, aware of the risks involved, and willing to wait for the duration before moving on. Remember, this process may yield savings, but it often won’t yield such a good price. It is, therefore, in every buyer’s interest to try and gather all the relevant information to make sound decisions. The best way to do this is to cooperate with an agent and a loan officer who understand short sales and their complications.
Here is a blog about buying a short sale home that you may find resourceful:
https://gcaforums.com/buying-a-short-sale-home/
gcaforums.com
Buying a Short Sale Home From a Mortgage Lender
The benefit of buying a short sale home getting a discounted price on the home. Disadvantages are it may take six or more months to close.