Tips on Buying a Short Sale Home
Many first time home buyers believe that just because a home is listed as a short sale that they are getting a bargain. There are many short sale homes that can be bought at bargain prices, however, that is not always the case. A short sale is a form of pre-foreclosure where you still deal with the seller of the home. Buying a short sale home is purchasing the home for lower than the amount of the mortgage the seller has on the home. For example, If a home seller has an outstanding balance of $300,000 on his mortgage and you are buying the house for $250,000, that is a prime example of buying a home via short sale. The seller of the house has been given permission by his current mortgage lender and will need the mortgage lender’s approval with your purchase offer for the short sale purchase offer to be valid.
Benefits of Buying a Short Sale Home
Millions of home values have plummeted after the 2008 real estate and credit market crash. Homes that were once selling like hot cakes for $500,000 can be only worth $250,000. If someone purchased a home in 2008 for $500,000 and has taken a $400,000 mortgage loan on it, the seller might be listing the house for $350,000 via short sale. A home buyer might think that the $350,000 price tag is a bargain and might be putting an offer for the listing price of $350,000. Even though the $350,000 listing price is way below the original pruchase price amount of $500,000, the house can still be overvalued and the market value of the house can be worth only $250,000.
Buying a Short Sale Home is not always a Bargain
Buying a home via short sale is a good strategy but the home buyer needs to do their own due diligence. Many times there are better deals to be had with non short sale listings. Please do not be misled with the term short sale. Remember that home prices has tanked drastically since 2008 and many homes values have dropped by 50% or more. Consult with your realtor and seek out your realtor’s opinions and do not just limit yourself in just shopping short sale homes.