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Why You Should Be Wary Of A Short Sale When Buying A House

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Why You Should Be Wary Of A Short Sale When Buying A House

House values rise and fall, the housing market builds and crumbles — and what do homeowners do?

We continue buying and selling houses.

When it comes to a short sale, you may think you’re getting a great deal for a house. But you need to be cautious. It’s important to recognize the dangers behind buying a house for less than the remaining amount of the mortgage, which the current homeowner needs to pay off.

The following are a few reasons why you should be wary of a short sale.

1. The Short Sale Information May Not Always Be Correct

Some mortgage underwriting systems cannot distinguish short sales from foreclosures on consumer reports, according to the Federal Trade Commission.

Make sure you talk with your lender about the logistics of the house sale, such as why it's being sold for less. It’s important to see that the house was the result of a short sale and not foreclosed.

2. The Seller Paid Too Much

The current homeowner may have paid too much for the house when the market value was much higher.

That means if they’re selling it for less than they purchased it; they do not have enough equity to keep paying the mortgage.

You need to make sure you know all the logistics behind the motivation of the short sale — such as talking with both the homeowner and the agent to analyze where you’ll benefit.

3. Real Estate Agents Could Be Selfish

Real estate agents profit from short sales, so they may be selfishly trying to motivate you to purchase the house. It’s important to make sure that you will not lose money or equity in the process of purchasing a house on a short sale. You may have to pay more money in other ways as well, which can eventually add up.

You can find reliable realtors in your area using programs such as Realtor.com.

Agents Are Not Obligated To Pay Certain Expenses

A short sale is much different than a regular home sale because the seller is not obligated to cover closing costs, a home warranty or make repairs. This could put you in danger for your future home, giving you less bank for your buck and increasing expenses over time.

Posted-In: Mortgages short salesEducation Personal Finance General Real Estate Best of Benzinga

 

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