Home buyers in Colorado Springs are likely to come across short sale properties for sale during their home search. Although short sale properties can often be purchased for below market value, buyers should take a few things into consideration before committing to a short sale.
1.) Interest Rate: Buyers can often lock the interest rate once they go under contract for purchasing a property but this is not the case with a short sale. Often times, lenders will not lock in the interest rate for a buyer until they receive a formal short sale approval from the bank in writing. If the rates are low at the time the buyer and seller go under contract on a short sale, they may increase by the time short sale approval from the bank is received, especially if the approval takes a couple of months or more. Furthermore, locking the interest rate for more than 30 days will cost the borrower so it is important to discuss it in further detail with a loan officer.
2.) Timeline: A short sale may not be a good option if the buyer is in a lease that is about to expire and does not have a month to month option. Buyers who still want to pursue a short sale need a back up plan if the short sale does not close by the time anticipated. Every short sale is different so have your real estate agent find out more information from the listing agent regarding the short sale and where the seller is in the short sale process with the bank.
3.) Inspection: Whether there are plumbing issues due to the home being vacant during the cold winter months or if the roof needs to be replaced, the home is probably sold as is. The seller may not have the finances available to pay for repairs. As a result, this may interfere with the buyer’s loan approval. Communicating with the lender about possible inspection issues with the home prior to writing the offer may be a good idea.
4.) Parties to the contract: If an arm’s length transaction is required, the bank may not approve the short sale if the buyer and seller are related to one another. Banks may also view it as a conflict of interest if the purchaser works for the same bank that is holding or servicing the short sale.
5.) Purchase Price: If the listing agent is aware of how much the bank needs to net on the sale of the home and prices the home to reflect that amount, buyers may not be able to negotiate further down on the price. Instead of wasting time submitting a low offer that the bank will not accept, moving on to another property may be a better option if the buyer does not feel comfortable with the purchase price.
Having your Colorado Springs real estate agent find out out as much information as possible in advance about a short sale property will assist you in deciding whether to submit an offer or continue your home search.
Additional Reading: 5 pitfalls of short sales
Contact me about buying a home in Colorado Springs at 719-660-9058
Colorado Springs Real Estate Agent, Patricia Beck, providing real estate services to home buyers and sellers.
Buyer’s agents can show FSBO Properties but buyers should discuss FSBO properties with their agent to find out how these types of properties are handled. Additionally, if buyers are interested in a home that is no longer on the market, real estate agents can always check on the expired listing and find out if the homeowner is still willing to sell the property.
