Zillow Advice: Home Buying - What are the disadvantages of a short sale?

For a buyer the disadvatage ...

Tue, 10 Feb 2009 22:44:00 GMT

For a buyer the disadvatage is truly the time. If you like a house, and have flexibility on moving date (30 days notice), then a shortsale is a choice you should not avoid. Just make sure a professional is handling the process.
Yes, homes that go to foreclosure do get offered for less more often than not, but understand they might be without appliances, and in much rougher condition. You get what you pay for, and an REO for 66% less than as a shortsale is usually for a reason.
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We tried to buy a house that ...

Mon, 09 Feb 2009 20:48:00 GMT

We tried to buy a house that was a short sale. Their bank took forever to just respond to simple things. In the end they accepted our offer, i.e. the seller's bank agreed to the price that we offered and yet they still drug their feet to the point where we ended up walking away. The house was just sold at auction last Friday for 66% of what we had offered.

The answer depends on whether ...

Sun, 08 Feb 2009 19:48:00 GMT

The answer depends on whether you are buying or selling.

However, for both parties, the main issue is the length of time it takes for the owner's lender to approve the sale. You could wait may months (usually 1-2 months, sometimes as long as 6 months) to receive an answer from the lender - and that answer may be a denial.

During this time period, unfortunately, many buyers will walk away and/or find another property to buy.

Also, a short sale will have an effect on the seller's credit, though not nearly as much as a foreclosure.

Occasionally, with short sales, the lender will require the seller to sign an unsecured note to pay off the unpaid balance in the future.

If it's an investment property, the seller may owe taxes on the shortage (you should check with your tax advisor for more information, regardless of whether it is your primary residence or an investment property).

The primary benefit of a short sale for the seller? You may be able to avoid foreclosure.

There are many pitfalls with ...

Sun, 08 Feb 2009 18:51:00 GMT

There are many pitfalls with a Short Sale.

1) Your Agent or Listing Agent or both do not know what they are doing.
2) Prolonged contract period (4-6+) months.
3) Because of contract period. Price you agree on today might be ok, but by the time you close property is already worth less then what you are purchasing for.