Are you interested in purchasing a short sale? If you don’t know the ins and outs of how this type of transaction works, you could find yourself paying more than you should. Here are just a few of the items that could hike up your costs:
It’s normal for the buyer to pay for an inspection on a home before moving forward with a purchase. But in a traditional sale, you can often negotiate to have the seller pay for some repairs or adjust the asking price downward to accommodate the additional costs. With a short sale, the lender is the one setting the price, and banks that are already taking a loss are less likely to be interested in negotiating the price down even further. You can also forget about freebies like home maintenance warranties – those just aren’t happening. Fortunately, some savvy sellers are paying for a home inspection themselves before listing their house. That way, the bank knows to set the selling price lower from the start to accommodate the need for repairs on the buyer’s part. Be sure to ask to see a copy of the inspection report if one has already been created.
In a buyer’s market, you’d expect sellers to be eager to pay for some of your closing costs. But this is less likely to happen with a short sale. You should understand fully which costs will be your responsibility. If the additional amount is significant, this could impact the amount of money you need to borrow (because it reduces the cash you have on hand for a down payment). So, be sure the bank you are borrowing money from to buy the short sale knows how much you’ll really need and that you qualify for that amount. Also, don’t assume you can close escrow on the sale of your existing residence and the purchase of a short sale concurrently. Delays (expected and unexpected) are common in a short sale transaction. If you know this going into the process, you have some time to negotiate for the best terms.
In some cases, the real estate agents on both the buyer and seller sides of a short sale transaction agree to take a smaller than average commission at closing. However, if you have agreed in writing that the agent who represents you is owed the standard commission percentage, you will need to make good on the difference if the lender won’t pay in full. Be sure to discuss this potential scenario with your agent before you sign any kind of broker agreement. Even if you pay a portion of your agent’s commission, it’s still worth it to get expert advice that can save you money in other areas of the transaction.
Short sale properties can be great deals for both buyers and sellers, just make sure you’re aware of these nuances before closing the deal.
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