Buyers-Is a short sale right for me?

For a buyer, purchasing a property can be the biggest expense they will ever have in their lifetime. Some buy many homes throughout their lifetime, some only one or two. And for some, it’s their first purchase that will either make or break what they do in the future. Whatever your experience is, when you are buying a property, it’s important to understand what your tolerance level is. And that starts with the first question…

What is your timeframe for purchasing? …

If you are in a rental and need to move out or only have a short time left to the end of your lease, a short sale may not work for you. Even if the short sale has preliminary approvals, there can still be things that crop up to prevent closing. Case in point- on one short sale that I was processing, we were two days away from a closing when the title work came in and showed a lien on the seller from a bank loan but not a mortgage. The lien was very old and the attorney for the lien holder had gone out of business. His files were sent to other attorneys. In trying to track down this lien file, it eventually came back that the file was back to the lien holder. The lien holder couldn’t find the file at all and it became a catch 22. They wouldn’t sign off on a lien if they were owed money, but couldn’t find the file to give us a payoff. The property went to sheriff sale one month later and we were out of time. If you were a tenant, in that scenario, you would be back to square one looking for a property to buy.  Now, if you are in a position of having time available to you, then a short sale can work to your advantage.

Next question- Do you have enough capital to make repairs and still have money for closing costs?…

If you are a first-time buyer or a buyer with limited resources to purchase a property, a short sale also may not be right for you. Short sales are as is sales. The seller is not in a position to make repairs. And, typically, the buyer is responsible for the fire/safety certification and certificate of continued occupancy (CO)(fire/safety cert is an NJ required certification, the certificate of continued occupancy is required by many towns but not all). If you were the buyer in a short sale, it would be your responsibility to procure these certifications which may require repairs. You would need seller permission, in writing, to work on the property prior to closing to procure these certifications.  Then there are the mortgage requirements. Your lender may also require repairs in order to close on the loan. Again, these repairs would be your responsibility.  If you have the ability to pay for repairs and still have money for closing costs, then a short sale may be right for you.  If the property requires a lot of work, you may need to get a rehab loan such as the FHA 203k.


All this being said, short sales are opportunities for a buyer to get a better deal on a home than a fair market property. Especially if the property is in the neighborhood you are looking to purchase in.

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