Purchasing a short sale property may seem like a great financial move, but there could be hidden costs that make such a purchase a bad idea.
“A foreclosure or short sale home might tempt you with the promise of a great deal, but it’s important to be aware of unexpected expenses that can arise after purchase,” an article on YAHOO! Finance reported.
Before considering a short sale home, a buyer should avoid these five mistakes that could prove costly in the long run:
Ignoring property problems — Owners of foreclosed properties sometimes damage the home out of spite. Or, problems can arise because the home is vacant and hasn’t been properly maintained. Under either circumstance, the article suggested buyers address any problems immediately.
Skipping the home inspection — A home inspection is a must when buying a short sale or foreclosed home. A general home inspection is great, but you may want to hire certified, licensed home inspectors who specialize in expensive problems common in the area, such as termites, mold, and structural damage.
Ignoring legal and insurance information — Unlike a typical disclosure, bank-owned properties often sell as-is without disclosure. Buyers must do their due diligence to ensure renovations have been permitted and approved, otherwise, they may be responsible for any citations.
Leaving too little time — Short sale and foreclosed homes don’t close as quickly as regular homes. According to the article, the seller’s lender must grant approval of either foreclosure terms or a short sale price that is less than the seller owes. Also, banks may be slow to respond if they are overwhelmed with foreclosures.
Falling hard for a bad home — The condition, inspection results, price, and value of the property should be considered dispassionately, according to the article. Jim Randel, real estate investor and author of “The Skinny on the Housing Crisis,” suggested buyers think of themselves as investors. In the article, Randel suggested they ask themselves three questions before purchasing:
Can you afford to rent it out for as much as, or less than, your mortgage payment?
If the home’s value drops another 20%, will you still feel satisfied with your purchase?
How much money will you have to pour into the property to make it habitable?
Source: “5 mistakes that could cost you when buying a short sale,” YAHOO! Finance (Sept. 5, 2016)