Should you buy a Short Sale?

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By now, most of us have heard about Short Sales. In case you have not, the short version is that the seller must sell their home for less than what they owe on it. This information is for you as a BUYER.

I hear many agents discourage buyers from considering looking at, and putting offers in on properties in the process of doing a short sale. This could be wise advice, depending on when you need to be in the homebut even that criteria depends on where the seller is at in the process.

The details of the short sale process are long and involved. Each process is different, depending on the mortgage holder, the sellers’ hardship situation, the types of mortgages (or HELOCs) held against the property, and the current value of the property vs. the loan against it.  Given a true hardship situation, however, a short sale can be accomplished.

I want to let you know the one great advantage of buying a short sale vs. a foreclosed home: OCCUPANCY.  That’s right.  You are buying a home that is generally still owner-occupied.  This means it is being maintained, cleaned, the heat is on – and in Michigan that is a HUGE need this time of year – and it is still generally loved.  A foreclosed home is VACANT, and quite often has been for quite some time.   If the heat is on, it is usually minimally.   If it is not on, then the property is winterized  (hopefully before it got cold outside), meaning it has antifreeze in the water lines, etc. to prevent pipes from freezing.  Regardless of that effort – being frigid cold is VERY HARD on a house.  I have had more clients saddled with unforeseen, unexpected repairs to their new home once they get everything up and running on a regular basis – even though the house passed the contractor’s inspection with flying colors.

No one wants the hardship that is involved in having to pursue a short sale.  But I have found in the people I work with, that if the sellers are willing to endure the stressful process of pursuing a short sale, it is because they want to do the RIGHT thing.  They still love their home and still care for it as they go.

I have also heard the comment that you can get a foreclosure for cheaper. That is true – for the market area I work most in Livingston County a foreclosure is about 34% cheaper, on average, to purchase than a short sale – for the market area I work most in Washtenaw County a foreclosure sells, on average, about 9% cheaper than a short sale.  But remember the unexpected costs that buyers may run into to restart the home and its mechanicals?   You may quickly eat up that savings.

This leaves you to decide what is important – a maintained, cared for, move-in ready home that has not suffered from shut down and start up – AND, on which we can get history and details from the seller?  Or a foreclosed property which, by the way, comes with no history?

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