Buyers looking for a deal to buy their own piece of paradise for their primary residence, a vacation home, or even an income property, might think a Sarasota short sale is a sure-fire way to get a real bargain. While it's true that distressed properties often come at a cheaper price, it's actually getting the transaction to go through that's a challenge in many cases.
The reasons are numerous, but if one thing is obvious, it's the fact that these types of residences aren't legally controlled by their occupants. Owners might physically be living in a single family home or a condo, but it's another entity that has the power to facilitate a sale.
If you are wanting to land a real bargain, time isn't on your side. Across the county, the number of distressed properties accounts for about 19 percent of all active listings. That figure has been hovering about the same for the past few months, but it's lower than the past few years. It also doesn't detail the actual number of short sales, compared to bank-owned, and foreclosures.
The Dirt on Distressed Properties
It's true, short sales, which constitute one type of distressed property, do come at a lower price than their non-distressed counterparts. You'd pay significantly more for the same square footage, location, and amenities if the home was being sold by its owners. That of course, is the good news; however, it does not tell the entire story.
"The short sale process may take more time than a traditional retail sale to complete and it may be difficult to pin down a firm closing date until the seller's mortgage lender(s) agrees to the short sale. Junior-lien holders such as second mortgages, HELOC lenders and other special assessment liens may also need to approve the short sale. If a buyer is bound by a specific timetable to buy a home, the short sale may not be an ideal route." --Freddie Mac
The biggest problem with these kinds of homes lies in the financial straits of their owners. Without the means to keep-up the mortgage and the near-inevitability of foreclosure and eviction, there's no motivation to keep the property well-maintained. As a result, many of these homeowners do not even make routine repairs, knowing that it's a waste of money because the property will no longer be theirs in a short time. Any fixes will be low-cost patch jobs, but that's only for things which are necessary, aesthetics are another matter. The bottom line is there will likely be problems which come with a short sale.
Know these Short Sale Buying Obstacles
If those things don't matter and saving a bit of money is the biggest goal, then a short sale is definitely worth looking at, but there are still more obstacles you'll probably face, such as the following:
- More than one decision maker. The seller is just one of the decision makers, but does not have the final say. The bank is the single largest decision maker, but isn't alone. Lien holders also have say, if they are part of the equation.
- Foreclosure is still a possibility. Just because the owners have struck a deal to stay in their home and have agreed to sell it, the lender can change that dynamic and proceed with a foreclosure. In some situations, the foreclosure process begins just a few months after a short sale is listed.
- Purchases are "as-is". This is quite important because anything that you find wrong with the property after the sale has gone through is your problem to deal with. It's even possible that safety issues have not been addressed and the reason for that is the owners do not have the money for repairs and the lender isn't likely to put money into a deal it's losing money on already.
- Possibility of denial. It can easily take months for the bank to reach a decision and even if it appears that the purchase offer is a sound one, there are no guarantees. Denials are quite routine, especially for low-ball offers as the lender is trying to recoup as much as possible.
- Financing can be a problem. If your financing isn't ready to go at a moment's notice, you might have sabotaged your own efforts. Have your financing in-place, because a decision to move forward with the sale can come at any time.
- Time is not on your side. The longer it takes to hear back, that's time lost entertaining other ideas or even making offers on other properties. If you are relocating to the area, for instance, it's best to have more options than just one.