On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate acquisitions & dispositions on Thursday, January 11, 2018.
Many real estate purchasers shy away from short sale properties because they hear a lot of third-hand horror stories.
Short sale investment properties can be a bargain, especially in areas where real estate prices were inflated at one point but have now fallen. You can also simply get lucky and happen across a short sale in a coveted location.
Short sales properties are those being sold for less than their mortgage’s total value. The sale is allowed only because the seller is undergoing a hardship that makes it the reasonable thing to do and the property’s equity is too low to cover both the mortgage and the costs associated with selling it (like realty fees).
For example, if a commercial property goes up on short sale, the owner may have been a corporation that dissolved due to a death or legal trouble, or gone bankrupt. The seller has to have permission from the bank to sell at the reduced price — so there’s no fear on your end if you’re the buyer.
If you decide to make an offer, you may have to wait a little longer than you would for a private seller alone to answer — both the owner and the bank have to agree to the sale. While the owner obviously wants to unload the financial burden, keep in mind that the bank is still going to want fair market value.
This is where it pays to do your research carefully. The property may end up with multiple offers if it is in an attractive area and at a good price, so don’t offer the minimum unless you really think that’s all it is worth. Before you write your offer, make sure that you:
- Research comparable properties that have recently sold in the area
- Note any faults or problems with the property that could reduce its value (such as poor maintenance)
Then, be prepared to wait. While you can get approval in a matter of weeks, a short sale isn’t for you if you’re in a hurry — expect 3 to 4 months before the agreement goes through.
Sometimes, a short sale can be significantly eased through the services of an attorney that’s familiar with the process. If you’re concerned about closing the deal, consider seeking advice on property acquisitions and dispositions.
Related Posts: How does the adverse possession of real estate work?, Bad real estate deal lands Taylor Swift in lawsuit, What’s the difference between mineral rights and surface rights?, Homeowners’ associations: What you need to know before you buy