When looking to purchase a home in Reston, you might decide to consider short sale properties. With a short sale, the lender agrees to accept an offer from a new buyer that is less than what is owed on the mortgage by the current owner. Lenders agree to this because it ends up being cheaper for them than foreclosing on the home.
For the buyer, this potentially translates into a great deal on a house that might otherwise be unaffordable. However, before you let yourself fall in love with a short sale property, you need to consider where this “too good to be true” deal may fall short.
Although the name implies speediness, the process of purchasing a short sale is best for the buyer who has time to spare. Approval from the lender or lenders can take four to six months or longer, not ideal for a buyer who wants or needs to move quickly. In some cases, a short sale could leave you shafted, as there is a good possibility that the lender will counter your offer, reject it completely, or not respond at all.
Cash is King
With a lower price, there could be several buyers competing for a short sale property. The deal breaker in a short sale competition is cold hard cash. For short sales, lenders prefer all cash or large down payments, giving the buyer with cash an advantage, and making short sales not ideal for first-time buyers.
While the low, upfront price of a short sale may be enticing, buyers may find themselves at a disadvantage that could translate into a lot of money for other things. Appraisals and title insurance are not split between buyer and seller in a short sale, with these costs often falling on the buyers’ shoulders. Home inspections and repairs are not required for short sales, which tend to be fixer uppers that are on the market “as is.” This means the money seemingly saved upfront might be lost to costly repairs, maintenance, potential structural issues, or pest infestations that aren’t revealed until after the transactions is complete.
After considering the downsides, if you decide you want to pursue a short sale, verify that the property is approved for short sale by the lender and be sure to get pre-approval for your mortgage. Find out if there are any other requirements you need to fulfill, then make your offer and prepare to wait. For buyers with the right amount of time and money, a short sale could be a perfect fit!