Since the deep recession periods of 2007, short sales have been a way for buyers to escape foreclosures and relieve themselves of weighty mortgage balances.
Even though, buying a short sale is an opportunity, it might also be a burden when you have to spend too much on repairs. Short sale, foreclosure or HUD home buyers must understand that many of these properties might be in poor condition since the owner who owed mortgage debt may not be able to afford the house’s upkeep, hence there may be major repairs needed.
For example if you bought a home for $20,000 less than its fair market value and you had to make repairs worth $30,000. You lost $10,000 on your purchase.
So here are the common errors to avoid when buying a short sale home;
1. The Obvious Issues
Don’t ignore the obvious issues like the termite damaged floor and the pipe leak. The price may be attractive and even though the neighborhood has good schools and fine houses, ignoring the obvious signs may cost you a lot.
2. Skipping the Home Inspection
Buyers should be involved in the home inspection. A considerable part of an inspector’s job is education. Buyers should therefore inquire about, problems, potential problems and how much it would cost to fix them. Never underestimate how much renovation costs.
3. Ignoring Legal & Insurance Information
Have all renewals been approved? Is the house on a floodplain? In a short sale, the current owners of the house may not be 100% percent open about the condition of the house.
4. Making Assumptions
A short sale typically can take longer than a traditional home sale transaction, and in some cases a good deal longer. Occasionally it will take a bank time to come to a decision; in many cases, bank employees have a lot more things to do and a short sale application might sit in their to-do box for a long while. Never assume that this will be a quick transaction.
5. Falling in Love
A lot of agents agree that the issue with a lot of home buyers is letting their emotions control their logic. When buying, you need to think like an investor. How much could you earn monthly if you rented the property? How much will it cost to rehabilitate the house? Many buyers love a home when they buy it, but their emotions change later after having put $ 40,000 in repairs. Carefully examine a house and make decisions logically.