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Nov

Five Tips For Investors Thinking About Buying A Short Sale

Many beginning investors see short sales as a very inviting opportunity to jump into the real estate investment market. 

They are attracted to the chance to buy low, but they don’t always realize the reality of what is happening across the nation with short sale transactions. It isn’t a simple solution for a financially distressed seller, or the path to fortune for the buyer/investor.

HomeLovers recommends keeping the following in mind:

1. Short sales CAN be a great deal, but they take a long time to come to fruition and most fail. 

If you spend four or five months waiting to hear a bank’s response to a short sale offer, other great properties  are passing you by. Because short sales are still a new experience for agents, buyers and banks, there are many bumps along the way and over 95% of short sale offers never make it to a closing.

It is important to understand the risks and make sure you don’t have all your eggs in one basket for a single short sale property.

1. Go into it realizing that the short sale is unlikely to close. Over 90 percent of short sale offers are not accepted, and many that are accepted fall apart at the last minute.

2. Don’t tie up all of your resources when the odds are against you. For investors buying multiple homes at a time, it is best to only include one short sale in the mix. This is especially true for the smaller investor that is only purchasing one to five properties and has limited cash resources. Once the offer has been made, your financial resources are tied up in that offer, preventing you from moving on other bargains that may come available. 

3. Take that due diligence deeper. A short sale requires a different level of due diligence than a normal real estate transaction requires. You need an agent that understands the process and how different banks are processing its short sales to improve the odds of the offer being accepted.

4.  Only make cash offers. Banks want a fast way to get the negative asset off their books. Cash offers are likely to trump a financed offer, even if the financed offer is for more money. Sweeten the cash offer with a fast close, and the odds of being accepted go up even further. 

5. Be prepared to pay closing costs normally picked up by the seller. Banks won’t budge on costs that will increase their losses, and sellers are refusing to pay normal closing costs. A short sale can go sour at the last minute if the buyer/investor doesn’t have cash on hand to cover the unexpected costs, such as a termite inspection, HOA back payments or liens, etc.

Have a question about buying a short sale? We will answer it – no obligation, no cost. Call HomeLovers at 602-792-5324. We know what makes an investment profitable, and we know the Arizona market.

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