What are some points of consideration when buying real estate in short sale?
There is this condo which is priced 140,000 in short sale. I am keen to consider it as I am paying 1350 rent for the same. What are some things that I need to look in to decide for this?
Also would it be better to continue renting in CA in the present housing situatio or buy when a good deal comes across? Thanks
We are also in the process of looking and bidding on foreclosed and short sale homes in CA. I’m not a professional but I’m learning a lot in the process. Some things to consider:
If you’ve been renting, it sounds like you’re a first-time home buyer (def: have not owned a home in the past 3 years). If this is the case look in CA for some special credits/deals for first time home buyers and see if they would apply to you. My advice kind of applies to buying a home in general, not just short sales:
Financially, have you looked into getting pre-approved yet? I shopped around and found a lender I liked and trusted first before I found a real estate agent. Most people do it the other way around, but I was mostly concerned about working with someone who was honest about my money.
Even though you’re paying the equivalent in rent as you would in a monthly mortgage payment, financial necessities to consider are:
1 – Do you have enough $ for 1% of the purchase that will become the escrow? If your bid on a house/condo gets accepted they will want that money.
2 – Do you have enough $ for a down payment? I think FHA loans are asking for 5% of purchase price down and typical bank loans are requesting 20% down minimum. They are probably going to want to see that you have the money for down payment.
3 – Do you have enough money for closing costs, which is typically about 3% of the purchase price? If the seller does not pay closing costs then you will also need that money up front.
4 – How is your credit? The higher the credit score the better loan you could get.
The time it takes for a short sale to happen could be what you need if you are working on improving your credit or to save money for all the above mentioned up-front costs.
Sometimes the price listed on a short sale is what the listing agent posts to get buyers like you interested but may not be what the bank will necessarily approve. Decided how much you really want to bid as your purchase price and work with your lender to realistically figure out how much you can pay in monthly payments, including taxes and stuff.
And be prepared to wait – short sales should be called ‘long sales’ because of how long the process takes. I hear banks are getting better and faster but in CA there are so many short sales everyone they have a hard time keeping up with the paperwork. Reality may also be that you wait a long time to find out if they accept your offer. Someone I know waited 10 months to find out their offer was not accepted.
Sorry this was so long – I hope it helped! Good luck!
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