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Risks Associated with Short Sales

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By : Karim El Sheikh    99 or more times read
Short sales are terrific investments if you know the risks you’re taking and understand the process.

These are preforeclosure properties because they have not gone through the formal foreclosure process yet and are still owned by the current owners. They are sold at discount prices because the banks would rather allow the sellers to sell the properties for less than go through a formal foreclosure process, which costs them a substantial amount of money and time.

You get to purchase a property with built-in equity. Also, short sales are generally in better condition because either the owner or their tenant lives at the property and maintains it. There are some risks that you need to keep in mind when you decide to make an offer on a short sale such as:

  • You have no guarantee that the seller’s lender is ever going to approve your offer. Make sure the seller calls his or her lender and finds out if the property qualifies for a short sale before you waste your time making an offer. Even if it does, you could wait three months to a year and the deal never still might never happen because the lender wants the seller to come up with some money at closing or wants the seller to sign a promissory note for $10,000 or $20,000, and the seller refuses to do so.

  • The property could go to foreclosure before the short sale gets approved. You could track the property through the foreclosure process, which is now taking as long as a year because lenders are so backed up, and then make an offer at the foreclosure auction or wait until the lender puts it on the market as a REO. By then, there is a good chance you may have found another property that you are interested in.

If you have the time and the home is really a bargain, then it is worth a shot waiting for a response from the lender. Short sales are less risky than buying foreclosure properties at auctions because you can inspect them, obtain title insurance and they are generally in pretty good condition. Also, you can feel good about helping the seller out because they get to avoid a foreclosure on his or her credit. The lender saves money because they don’t have to hire a law firm to handle the process, they avoid court delays and save a lot of time.

Best Places to Find Short Sales

Working with a local Realtor® is the best place to find a short sale. The Realtor® can search the MLS to find one that meets your price and other criteria. They may even be able to find you a pre-approved short sale, where the lender has approved the sales price, but the first buyer walked away.

The Internet or newspapers are also good sources to find a short sale. You may want to drive around the neighborhood you are interested in buying and find a sign advertised by a for sale by owner. The county recorder’s office and county clerk’s office are good places to search for notices of defaults and foreclosure sale filings.

There are many great opportunities if you understand the risks and benefits of buying short sales. Since there are so many short sale properties available, you have a large inventory in most price ranges and neighborhoods to choose from.

If you have an opportunity to purchase a short sale, you should go for it. is the website for find short sale properties in your area. Search all short sales for a deal of a lifetime.

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