Good Deal?

Short Sales and Estates

Is it worth it to buy a short sale? Can an estate be a way to get a deal on your next home?

Short sales are homes that are for sale, generally 10% below market value, and the bank will accept less than what is owed on the home. This happens when people buy high and the market decreases in value, or when various liens on the house outweigh what the seller could get for the home. A buyer of a short sale cannot have a home-sale contingency in their offer, and must be patient. I was talking to an agent several weeks ago that had a short sale in her office last 2 years. The average amount of time a buyer can expect to wait from the time they make an offer on a short sale, until getting to the closing table is about 4-6 months but could be more. The buyer would need to be prepared for that and be in a month-to-month lease situation or living w/ relatives or another flexible living arrangement while they wait. Many short sales are in great condition, and the buyer can still have inspections done. The only twist, is that they cannot expect the seller or bank to take care of any issues that come up in the inspection report really....maybe a little inexpensive item*, but considering the seller had to appeal to the bank expressing a hardship of some matter, the bank would frown upon the seller putting money into the house that could've gone to them, is the way they look at it, i guess. The buyer w/ the agent's help would also typically be responsible for obtaining the U&O and any HOA doc's/certificate of resale and they would have to pay for those items as well. But all in all, if you are patient, a short-sale can be an excellent investment. I bought one and I have never regretted it. *As a buyer agent for several short-sales, I have gotten 2 trees removed, a septic pumped out, a thermostat fixed, and a shelf in a cabinet fixed.....even though generally nothing is done by the seller or bank on these homes, but if you never ask you won't know.

Estates are another way to go that can be a great situation to save some money on your home purchase. Generally, estates are being sold by the heirs and many times the homes are out-dated and therefore if they are in good shape but just need some paint, carpet, fixtures or a bathroom/kitchen remodel, that is a great situation to gain equity immediately in the home. If your agent can advise you on getting a seller assist, you can bring less money to the table at closing and then use that money to put into the house. Another thing to think about these homes is that the relatives a lot of times just want to unload them and not worry about the time/effort of carrying the home w/ the maintenance, bill paying and costs of heating etc. Also, many times these homes are paid off and they are just going to be profiting no matter what they sell them it seems like for these reasons these homes are sold for less than they could be and the minute you put some love into these homes the value goes right up!

Make use of your buyer agent and make sure you are asking who owns the home, what they know about the situation and if they can advise you on seller assist. (Seller assist is dependent upon the loan they are electing and a savvy realtor can let you know very easily how much assist you can look to get in the deal.) In an upcoming mini-blog, I will talk about seller assist! Take care and happy short sale and estate shopping!