How to buy a Short Sale
Bookstores are full of books purporting to help people "buying a short sale at discounted prices". An equal number of websites promise bargains on short sale homes in hot markets, or promote "foreclosure lists" for a fee extolling the benefits of short sale for a buyer. In reality, there are good buys on short sale homes for those who are willing to work at it, but the process of locating, buying a short sale, and working through the legal and emotional complications is not for everyone. For those buying a short sale, who already understand the benefits of short sale for a buyer and hoping to find a true bargain in real estate, there are some important points to keep in mind. McFarlin & Geurts can provide the following general information.
IDENTIFYING SHORT SALE HOMES TO PURCHASE AND BUYING A SHORT SALE:
- Statistics have often shown that a very low percentage of recorded foreclosure notices result in the owner actually losing the home to foreclosure, many become in short sale homes and some investor buying a short sale at a bargain price. Accordingly, waiting until the actual foreclosure auction, may be too late, the good properties may already be bought and sold.
- Foreclosure lists are publicly available from county records, and there are thousands of them in most counties each month. Orange County foreclosures and short sale lists are freely available to anyone who cares to seek them. Prepare to spend a substantial amount of time researching those properties.
- Professionals, such as attorneys, insurance agents, tax specialists, and accountants have access to the best information and bargain deals. Generally the accountant or attorney is "the first to know" when things are not going well for a borrower and that there is an opportunity for buying a short sale or where to look for bargain short sale homes.
BENEFITS OF SHORT SALE FOR A BUYER
Many investors assume that the very status of a property as a "short sale" home listing makes it a bargain, this is simply not true and a dangerous approach to real estate investing. There simply are no absolutes in real estate investing generally or when buying a short sale. Everything is relative, any property can be a bargain at the right price, and any property can be a loser. The benefits of short sale for a buyer are determined by the particular transaction, not some formula or universal criteria. Buying a short sale can be rewarding and lucrative, but is teeming with pitfalls as well. If you are an investor, or buyer, looking for short sale homes to invest in, McFarlin & Geurts, through in house brokerage Clear Point Real Estate Services can assist you with buying a short sale and avoiding those common mistakes most investors make. The Orange County foreclosures and short sale market is unique and complex and although we are headquartered in Orange County, California, we have a network of professionals who can assist you throughout California, or even in other states.
SHORT SALE HOMES
As was discussed previously, the mere fact that a listing is a short sale home, does not make it a deal. All it really indicates is that the previous buyer paid too much and now owes more on the property than it's worth on today's market. Additionally, a short sale home listing indicates the home has decreased, often substantially, in value since the last sale, and is in a declining market. Buying a short sale and getting a deal is not impossible however, everything is relative. Often markets "overcorrect" or lenders have other motivations to get whatever price they can for a property fast (liquidity issues), and a savvy investor may be able to reap the rewards of such conditions.
Additionally, short sale homes are sold "as is" without any representations or warranties from the lender. When buying a short sale, or considering a short sale home, investors should be aware that lenders typically refuse to pay for common items such as: suggested repairs on a home inspection, pest control (even if it is determined the home has such problems), roof certifications or roof repairs, home protection plans and deferred maintenance. It typically also takes much longer to close when buying a short sale, or considering a short sale home as the whole transaction must be approved by the lender. Many Realtors will "steer" clients away from buying a short sale or even looking at short sale homes, despite the benefits of short sale for a buyer because the lender will almost always cut down the Realtor commission to much less than a Realtor would get on a traditional transaction. The benefits of short sale for a buyer can be substantial, as long as the buyer/investor knows what to look for or is working with qualified attorneys and professionals such as McFarlin & Geurts and Clear Point Real Estate Services.
