Mistakes in a Short Sale
As the leading San Diego short sale experts, we can confidently state that there has never been a better time to buy a short sale property. The reasons that these transactions are so timely include:
- A move by lenders away from foreclosures and towards short sales
- Relocation reimbursements that induce distressed homeowners to consider short sales
- A tax-exemption for forgiven mortgage debt that runs out at the end of 2012, creating selling pressure now
- New regulations that result in lender decisions within one to two months
- Signs that home prices may have bottomed out in many San Diego communities
The one proviso we make is that you really need an experienced short sale broker to help you avoid costly mistakes. We have heard a number of horror stories regarding buyers who didn’t have the proper information before closing on properties that turned out to be highly problematic. Here is our list of the Top Five short sale buyer mistakes:
- Overlooking Property Problems: A prime example of this kind of problem is when the property purchased has already been foreclosed by the lender. Under a quirk in many state laws, the banks are exempt from providing the standard disclosure statements required of traditional sellers. They won’t tell you if the property was built with defective materials or whether the previous homeowner took advantage of court-ordered remediation. Buying a foreclosed property is a big gamble, as it is sold “as is” with little recourse for careless buyers. Short sellers have motivation to fix up their homes to help the sale. Foreclosed homeowners are filled with rage and take it out on the floors, walls and plumbing.
- Skipping Home Inspections: Make sure you attend the home inspection. Aggressively ask questions. Don’t ”root” for problems to be smaller than they actually are. You will simply be underestimating your renovation costs. Under no circumstances are you to waive the home inspection. Might as well shoot yourself in the head.
- Ignoring Legal and Insurance Information: If you don’t have a disclosure statement, you may not be aware that the property lies in a flood plain or has unpermitted renovations. Also, check with your neighbors to see if they have any building plans.
- Underestimated Time To Close: Short sales and foreclosures may take much longer than you expect, so make sure you are not counting on securing the property by a date certain.
- If You Want Love, Get a Dog: Don’t fall in love with the property. Remain dispassionate and objective. Will you still love the property if its value drops 30 percent? If it requires three times your initial estimate to complete renovations? Love is for family and pets, not for properties up for sale.