A foreclosure or short-sale home might tempt a buyer with the promise of a great deal, but it’s important for buyers to protect yourself from common mistakes.
A short sale occurs when a homeowner sells a property for less than the total amount owed on the mortgage, therefore the lender isn’t getting all of its money back. Many homeowners facing foreclosure – a typical precursor to a short sale- don’t want to leave their homes, and a few take their anger out on the house or completely ignore structural and issues of safety that ought to be addressed immediately.
5 fairly typical errors when purchasing short-sale homes
Typical buyer short-sale problems
1. Ignoring the obvious
The house is in a great section of town with good schools, and the cost is significantly lower than everything else nearby. Some buyers wish to live there so much that they overlook the little things – such as the kitchen floor which gives a bit and they do not want to entertain the idea that it might be termite damage.
2. Skipping a home inspection
Buyers really should be a part of the home inspection. “Most of what we do is education,” says Kathleen Kuhn, president of inspection firm HouseMaster. She says buyers should ask how much a problem would cost to correct, or make a note of the issue and find out later. “Every homeowner underestimates how much renovation costs,” says Kuhn.
3. Ignoring legal and insurance information
Have all renovations been permitted and approved? Is the home within a flood plain? In a short sale, the home’s current owners may hold back a lttle bit on doling out information.
4. Assuming it’s not going to take long
A short sale usually takes longer than a normal home sale transaction, and quite often considerably longer. In some cases it will take a bank time to decide; in many cases, employees have a lot to get done, and that one short sale could sit in their to-do box for some time.
5. Falling in love
“Think of yourself as an investor,” says Jim Randel, real estate investor and author of “The Skinny on the Housing Crisis.” Never allow emotions override logic. Just how much could you earn monthly if you rented out the property? Just how much could it cost to rehabilitate the property? Many buyers love a house when they buy it, but their emotions change later after they’ve put $40,000 into repairs.
