Q: Hey Jo, I was wondering--I've heard horror stories about buying houses up for short sale. I found a short sale house I really love that's also seems like a great bargain. Do you think it's a good idea to go for it?
--Sarah, Santa Clarita
A: Hi Sarah, that's a really good question, and one I've heard a lot over the last few years. I'm sure you've read up on the pros and cons of short sales (there are tons of articles about them online), but in case you don't know the ins and outs, here's a basic overview.
A short sale, in layman's terms, is when a house is worth less than what's owed on it. So, for example, say someone bought a house for $500,000 at the height of the market and still owes $450,000, but the market has dipped and the house is only worth a total of $430,000. The bank/lender might agree to take the loss, accept less than what it's owed, and put the house up for short sale.
Now, whether or not it's a good idea to go for it depends on what you are looking for. Here's the big pro of buying a short sale: you really can get a terrific deal. So if you're not in a rush and you're looking to save some money, then a short sale might be a great buy.
Don't get too excited too quickly--there are some big cons that come with buying a house on short sale. The main problem is that escrow takes f o r e v e r. If you can wait many months to move into your new home--if time is no object--then go for it. But be aware that these transactions often move at a snail's pace. A lot of times, buyers give up several months into the process; they've wasted an entire season when they could have been looking at houses.
There's also the problem of the initial price point being lower than what the home will actually end up going for. Banks don't communicate with real estate agents, so agents price short sale homes very low to attract a lot of potential buyers. It's only after an offer is made that agents get an idea of what price point the bank is actually looking for.
I go into more detail about the process in this week's video, which you can watch here: https://www.youtube.com/watch?v=K_enW-Jl6uk
Short sales can be great investments, but it's a smart idea to talk to your real estate agent so she or he can help you work out whether or not it's the best idea for you. Good luck, Sarah!
Got a real estate/neighborhood question? Email me at askjo@theokeygroup.com. Interested in seeing homes currently on the market in NELA/on the eastside? Check here: http://www.jorealestate.com/idx/search/
See you next week!
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