Are you thinking about buying a short sale?
Buying a short sale can look like a great opportunity if you are looking to buy a property at a reduced price. However, a short sale often comes with a number of disadvantages. The process of buying a short sale is much more complicated as compared to buying just any property. This is because there are certain risks involved in investing in a short sale.
Here are some disadvantages of a short sale.
Disadvantages of Short Sale
1. It Is a Long Process
Do you want to buy property quickly?
If yes, then a short sale is not the best option for you. Approving of a short sale is a long and tiring process and may take up to a year to finalize. A number of factors determine the time it takes to buy and approve a short sale. The number and experience of the lenders is a major determining factor in how quickly you can buy a short sale.
2. Mortgage Lender’s Approval Is Necessary
If you are buying any typical property, you only need to get the approval of the person who owns the property. This is not the case in short sales. While you’ll have to get approval from the current owner of the property, they are not the only ones you need approval from. The mortgage lender must approve the sale as you are trying to get them to accept less than what they are owed for the specific property. Thus, it takes a lot of time in all this convincing which makes buying a short sale a long and tiring process.
3. Opportunity Cost Is High
Another disadvantage of buying a short sale is that it makes you miss out on plenty of other good opportunities. You are so invested in the long process of short sale approval that you miss out on other potentially better purchases and properties. Your resources and time are all tied up in the short sale negotiation process and you lose many better investment opportunities during the process.
4. You Buy the Property As-Is
Most of the people who are trying to negotiate a short sale are in some financial troubles. Thus, you cannot expect them to keep their property well-maintained. The property may also have some deeper plumbing, electrical or—even worse—structural issues. Hence, when you buy a short sale property, you are essentially buying the property as-is. The maintenance and other such issues will not be catered to by the bank as they are already losing money on the property. It is very important that you get a proper home inspection before you make any final decisions about the property.
These were some common disadvantages of buying a short sale. Make sure you understand the risks of investing in a short sale before you go on and make any final decision. Your time and resources will be stuck in a short sale for a long time. If you don’t want to miss out on other better opportunities, then it is better to make smart and informed decisions.