At first glance, opting for a short sale when buying a house seems like an appealing prospect, particularly for investors. It frequently presents a chance to acquire a property at a price significantly below its usual appraised value.
But before jumping in, you need to be aware of the disadvantages of buying a short sale in Kansas City.
Depends on Mortgage Lender’s Approval
A short sale can be a complex process in real estate. It involves selling a house for less than what is owed on it, but unlike a foreclosure, the house is still owned by an individual. The owner must either make up the difference between the owed amount and the sale price or negotiate with the lender to write it off.
However, it’s important to understand that the owner does not have the final say on the sale price; it is the lender who ultimately approves it. Since the owner is requesting the lender to accept less than what is owed, the lender may not be eager to agree to the proposed price. This means that negotiations can be challenging and time-consuming, and there is a risk that the lender may reject the offer. If this happens, the process would need to start over.
And on top of that, if there are liens against the property, you’d have to get more than one lender to agree to the sale price.
The Drawback of Short Sale Pricing
When considering the purchase of a short sale property in Kansas City, it’s important to be mindful of potential pricing challenges. A significant issue arises when the advertised price may not align with the lender’s approval, often used as a lure for prospective buyers but subject to change in the final approval.
If your offer is not accepted at the initially advertised price, the lender may present a counter offer. Unfortunately, this counter offer could surpass your original willingness to pay for the property, leading to wasted time and effort on your part. Furthermore, in cases where multiple liens exist on the property, even if the primary lien holders accept your offer, a subsequent lien holder may reject it.
Extended Duration
If you’re in need of a swift property acquisition, opting for a short sale might not be the most efficient choice. The process of finalizing a short sale can, at times, stretch out over a year. Among the various drawbacks associated with purchasing a short sale property in Kansas City, the protracted timeline could be particularly discouraging for potential investors.
Acquiring a property through a short sale demands a considerable amount of patience. While it typically takes a few months for a response from the lender, instances where the process extends to nine months or more are not uncommon. Several factors contribute to this extended duration, including the lender’s familiarity with short sales, the involvement of multiple lenders, and whether the seller has already obtained short-sale approval.
The upshot of this is that buyers can lose out on low-interest loans with rates guaranteed for only 60 to 90 days. Buyers could also lose tax credits during this protracted waiting period.
“As-Is” Sale
Typically, individuals seeking to engage in a short sale are experiencing financial distress or hardship. In such circumstances, it’s highly probable that they lack the financial means to adequately upkeep the property. Given that the lender is already incurring losses on the sale, they are unlikely to provide concessions for maintenance issues. Consequently, the majority of short sales are conducted on an as-is basis.
Prospective buyers contemplating a short sale should be mindful that substantial funds may be required for comprehensive property inspections. Moreover, they might find themselves facing additional expenses for necessary repairs.
Buying an investment property isn’t always as easy as it seems, and a deal isn’t always as sweet as it appears on the surface.