How Do Short Sales Benefit Buyers?

by Nicole Crawford

At first glance, a short sale property may seem to offer little or no benefit to buyers except for a low selling price; however, experienced investors know that short sales are often exceptional deals, both in terms of short-term cash outlay and long-term investment. Buying property in this way is a fairly sophisticated and sometimes risky investment strategy. Understanding the basics will help you decide whether a short sale transaction is something you might consider.

Price

The most obvious benefit of short sale properties is the low asking price. The majority of short sales are purchased at 10 to 30 percent below market value, according to Ocean Point Properties. However, as noted by Investopedia, you shouldn't assume that every short sale is a great deal just because the asking price is low. If you do find an exceptional short sale deal, be prepared to increase your offer price, as the bank will likely make a counter offer.

Condition of Property

Short sale properties are often residential dwellings that are still occupied by the property owners, which makes them less susceptible to damage and vandalism. Foreclosed and bank-owned homes, on the other hand, may have been damaged by frustrated previous owners or may even be occupied by transients, especially in economically distressed areas. Even so, you should keep in mind that while short sales may have fewer obvious cosmetic problems, there could be other underlying issues due to the current owner's financial difficulties.

Timing

Short sales can take several months to close. This is often considered one of the disadvantages of short sales, but it can be beneficial in some situations. For example, if buyers are locked in to a previous real estate contract for a few months, the longer closing time may be an advantage. Keep in mind, however, that a longer wait time also brings a certain amount of unpredictability. Some buyers wait months to close a transaction, only for the bank to deny the short sale.

Challenges

Short sales can be risky for buyers as well as sellers, lenders and agents. To increase your chances of success with a short sale, work with knowledgeable real estate professional who has a high success rate on previous short sales. You will usually be required to purchase the property "as is" and pay for necessary repairs out of your own pocket. Buyers with contingencies and poorly qualified financing are also less likely to be successful with short sales, so be sure that you have a pre-approval letter, sufficient cash for a down payment and plenty of time to wait for short sale approval.

About the Author

Nicole Crawford is a NASM-certified personal trainer, doula and pre/post-natal fitness specialist. She is studying to be a nutrition coach and RYT 200 yoga teacher. Nicole contributes regularly at Breaking Muscle and has also written for "Paleo Magazine," The Bump and Fit Bottomed Mamas.

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