In today's market, many buyers feel that they want to get the deal of a lifetime. There has to be a short sale or foreclosure out there that has their name on it and is at that bargain basement price that they can pick up for a song. Surely you have heard the stories? Homes selling so far below what they are worth it will make your head spin!
Well there is another side of the story! Certainly there are some deals left to be had, but most of the "good deals" are snatched up before they hit the MLS. Buyers are lined up and ready to pay cash. It is just a mere formality that some of these deals hit the MLS, because it may be part of the process.
Short sales and foreclosures or bank owned properties are not for the faint of heart. A distressed property is just that, distressed! In the short sale process, the bank agrees to a sale below the loan amount that is due to the investor. This is oversimplifying it a little, but the point is that buying a short sale may not be the great deal you think it is. You always have to remember that in most cases, the home is going to go for what the market will bare.
The home owner is under-water on the home. This generally means that they are not getting anything back when the property sells. Like the house above, the short sale or foreclosure may be in disrepair because the home owner does not want to sink any more money into it. Chances are they can not afford to put money out for general maintenance. This means that areas such as plumbing, electrical, home appliances may be broken or in need of replacing.
Some distressed property owners are so upset about the situation they are in, they cause deliberate destruction. The house may be decaying because of lack of paint and termite damage. Hidden costs can add up. In most cases, you cannot rely upon disclosure to find out about the details. Why? The home owner may already have moved out causing the bank to take the home back. The bank is not obligated to disclose any problems unless they have lived in the home. So it is up to you to make sure you are getting the best deal possible.
As you may already know, there are properties that may not sell for other reasons, such as an unreasonable or difficult seller or the home was put on the market at the wrong time and wrong price. Don't forget that you may be dealing with a third party who is the investor (bank). They have the final say during the sale. This is all business to them. There is no emotion and you may not have the leverage you anticipate.
Make sure you get a good and accurate inspection and have a calculator handy so you can figure out the hidden costs. If major repairs are necessary, you will need a licensed contractor that you can trust who will not gouge you.
The old saying "If it looks to good to be true, it probably is" may apply on a distressed property. Be ready to walk away. The "deal of a lifetime" may become a lifetime of nightmares and expense if you are not careful. Remember that movie "The Money Pit"!
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