Buying a short sale house in Arizona is one great way to get an incredible bargain. Here in 2010, it is unfortunate that so many homes are in trouble because they are worth less than what their owner owes on their mortgage. While this is bad thing for current homeowners it is a wonderful situation for home buyers looking for a bargain on a home.
Whether you are looking to buy your first home or would like to profit from the current real estate market, you will more than likely look at properties being listed and sold as either a Short Sale or a Foreclosure. Which one is best and which one deserves your focus depends upon your own unique circumstances. In this article we look at buying a short sale. (Read about buying an Arizona foreclosed home)
A Short Sale, by definition is a home being sold for less than what the current seller owes on the property and the seller does not have funds available to make up the difference at closing. This type of transaction can sometimes be referred to as a Pre-Foreclosure.
At its best, a short sale can be a win-win for both parties. For the seller, a Short Sale provides the opportunity to avoid foreclosure and the dreaded implications that a foreclosure brings. The lender, in turn, receives most of the value of the loan sooner, and avoids incurring the additional legal or carrying costs a foreclosure requires.
Purchasing a home via a short sale is a great option for savvy buyers who have no contingencies, have cash reserves or those that have been prequalified for their mortgage and have time to wait the 2 to 6 month period normally associated with the Short Sale approval process.
Potential pitfalls when purchasing a home sold on Short-Sale include:
- Potential for rejection. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.
- Bad terms. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.
- No repairs or repair credits. You will most likely be asked to take the property “As-Is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits.
The obstacles to complete a purchase of a Short Sale property may be considerable. But if you have the time, patience, and perseverance to see it through, a Short Sale can be a win-win for both you and the Sellers.