5 Risks in Buying a Short-Sale Home — and How to Handle Them

Christine Tusher
Houzz Contributor

1. Unpaid liens. These can range from contractor liens to a surprise second mortgage, potentially adding tens of thousands of dollars to the cost of the home.

The solution: Do a preliminary title search on the home to determine the extent of any unpaid liens. Your real estate agent likely knows a title company that will do this for free.

If you do decide to move forward with your purchase, buy an owner’s title insurance policy instead of a lender’s title insurance policy. The owner’s version will protect you against any undisclosed title defects, while the lender’s version protects only the bank.

2. The deal goes sour. In some cases the sellers are so far behind on their payments that lenders have to approve the sale even after the seller has accepted a buyer’s offer. If the accepted offer is below what the lender requires to release the lien, the lender will ask the buyer to make up the difference at closing.

The solution: Make sure your real estate agent has done due diligence in finding out the full extent of the seller’s financial troubles. Specifically, you want to know whether this deal requires lender approval. If it does, understand that you’ll run the risk of having to put down more cash to get the keys.

3. Deferred maintenance. Rules on disclosures vary from state to state, but in most cases, the seller will fill out a disclosure form listing everything he or she knows about the property. Unfortunately, this may not give you an accurate account of the home’s condition. Cash-strapped sellers have often deferred maintenance and repairs on the home, which could cause problems to be much bigger than they realize. The result: The buyer faces a mountain of maintenance tasks and repairs.

The solution: Tag along on the home inspection. Come armed with a list of questions for the inspector about anything you’ve already noticed and speak up about anything that worries you.

When the inspector notes a problem, ask how much he or she thinks it will cost to fix it, and double check that estimate when you get home. If the initial inspection discloses damage from termites or mold, it may also be a good idea to call in a specialized inspector to determine the full extent of the damage and what it will cost to repair it.

4. Incomplete information about the property. Because disclosures on bank-owned properties are different, some buyers purchase a short-sale home only to find out later that it is on a flood plain or that the empty lot next door is about to become a minimall.

The solution: Do your due diligence. Check FloodSmart.gov to make sure the home isn’t on a flood plain, and consult the local planning department to make sure the area isn’t zoned for development and that neighbors aren’t permitted to build right up to your property line.

5. Closing drags on. Short sales can take much longer to close as banks work to approve the deal, and legal problems due to unresolved liens create unforeseen delays.

The solution: Plan ahead. Understand that it may take six months or more to close. Have a backup plan in place so you have an affordable place where you can stay in case you need to move out of your previous residence before the new home is ready.

Team Pendley
with RE/MAX Integrity
We Go The Extra Mile, It’s Less Crowded!

http://www.teampendley.com/

Pat Pendley, Principal Broker
(541) 990-2530

Christie Pendley, Broker
Certified Distressed Property Expert
(541) 619-3640

Doug Hall, Broker
(541) 979-0571

**Pat Pendley, Christie Pendley ,and Doug Hall, are licensed Real Estate Brokers in the State of Oregon with RE/MAX Integrity

Team Pendley is a proud sponsor of
The Springhill North Albany Car show to benefit CASA of Linn County
http://springhillnorthalbanycarshow.com
https://www.facebook.com/springhillnorthalbanycarshow

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One response to this post.

  1. […] Christine Tusher Houzz Contributor 1. Unpaid liens. These can range from contractor liens to a surprise second mortgage, potentially adding tens of thousands of dollars to the cost of the home. The…  […]

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