- Neither the seller nor the lender is likely to make repairs to the property.
Many short sale properties have deferred maintenance, as the seller may stop paying for maintenance as money becomes tight. By the time the sale occurs, many short sale sellers are either unable or unwilling to pay for repairs. They realize that every dollar they spend on the property is a dollar they will not receive back. If a buyer wants to purchase a short sale and the property requires repairs before the buyer’s bank will lend any money, the buyer should find a way to make the repairs themselves or find a different property to buy. There is a risk to the buyer repairing a house before they purchase it or obtain a short sale approval to purchase it. If the buyer improves the house and the short sale fails or the buyer opts to walk away, then the buyer will have wasted their time and money on a house they will not own. Furthermore, few contractors will work on a property and wait to be paid at closing.
- If the buyer waits until after the short sale approval is granted to ask for a repair concession or lower price, it is far less likely to be approved.
Some buyers wish to wait until after a written short sale approval is granted before they conduct their home inspection. In a regular transaction, the inspection period may be an opportunity for the buyer to request a credit or price reduction for repairs. Buyers should realize that if the seller’s lender has already approved a short sale, then it is highly unlikely that the lender will allow a price reduction or repair credit. If a buyer believes that a repair credit or price reduction may be needed, they should conduct their home inspection right after the signing of the real estate contract. It is much easier to amend the price or terms of the transaction before the seller’s lender makes a final decision. In most short sale transactions, it is better for the buyer to conduct their home inspection right away instead of waiting for a short sale approval.
- It may take months to receive a response from the seller’s bank. Short sales happen gradually, then suddenly.
A buyer who must move into a home within 60 days of submitting an offer should seriously consider making an offer on a property that is not a short sale. The closing date is hard to predict early in a short sale negotiation process. Furthermore, there is a risk that a short sale may not be approved, and the buyer may not learn of this until weeks have passed. Anyone who wishes to buy a short sale should be patient and not under pressure to move in soon.
- If the buyer is under contract with the seller, take steps to ensure that the seller is committed to the transaction.
The policy on how to mark a short sale listing in the Multiple Listing Service (Pending, Available with Contingency, or Available, among others) is subject to the office’s Broker of Record and perhaps the local Association of REALTORS®. Once a seller signs an offer from a buyer, some listing agents mark the listing as being under contract with no more showings as a sign that the seller is committed to that buyer. Other listing agents continue to market the property, soliciting offers that may be superior to the one that the seller already signed. If the listing agent continues to advertise the property, that could jeopardize the initial buyer’s position, as there is a distinct possibility that the listing agent and seller may seek to terminate the contract in favor of a better offer. If the buyer has already paid for inspections, an appraisal, an interest rate lock, and other costs associated with the purchase of real estate, the buyer may forfeit those costs if their contract is terminated. In some states, the policy is to have the property remain active or available in the MLS even though the seller is under contract with a buyer. Regardless, the buyer and their agent should convey their high level of commitment to the seller and elicit a high level of commitment in return.
- Be prepared to pay a little more at closing, as last-minute payoffs creep up that the seller and their bank may not pay. As the final fees and costs are tallied on the Settlement Statement, there is a possibility that someone will have to pay more than expected. A water bill that is higher than planned, a late fee added to a delinquent lien, or a property tax credit that is smaller than anticipated could increase the seller’s costs. However, the seller may not have the funds to pay the extra cost, and the bank may be unwilling to take less to cover the shortfall. That may mean the buyer has to pay a little more just to ensure that the transaction occurs. The buyer should be prepared to absorb several hundred dollars in additional costs just in case.