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Is a Short Sale the best deal?

In this housing market, it's natural for a buyer to want to get the absolute best deal. We are bombarded by news of the large foreclosure problem and the talking heads reading the news rarely mention "all real estate is local" and the statistics they are quoting are national averages. But, if you look, there are short sales and foreclosed properties in every market. The question is, are they the best deal for you?

Let's talk about short sales first. A house listed as a short sale means quite simply that the seller owes one or more banks more money than the house is worth in today's market. It has nothing to do with the buyer and there are no protections built into the process. One of my favorite settlement attorneys explained it this way:

If you make an offer on a short sale and the seller accepts the offer, do you have a contract? Yes, but it has an unusual contingency - it is subject to approval by a 3rd Party, the Bank. The buyer has almost no control over the transaction and may never buy the property. The buyer may have to spend money for an inspection and other fees and the short sale lender may come back with changes to the contract after months. The dates in the original contract mean nothing to the bank - they just don't care.

One of my clients asked "but shouldn't I try to make a low ball offer on a short sale because it really could be the best deal?" So we talked about it. This client is looking for a home in which he and his wife can eventually retire. They know exactly what they want in a home down to the last detail but they also want a good deal. I asked him how he would feel if they made an offer and then had to wait for 90 or 120 days only to find out that the bank rejected the offer or countered at a higher price than they wanted to pay. What if, during that time, interest rates rose by 1% or even more and the terrific deals being offered by builders in the new home communities went away. Coming up on the year end, there are some great incentives on inventory homes and even to-be-built homes that will not last forever.

Then we talked about the quality of the home. At least one of the new home communities we are looking at offers very energy efficient construction, materials and HVAC systems. Is the quality comparable in the short sale home or foreclosure? Maybe, but what I'm suggesting is that it's not automatically a "great deal".

When you're looking for a home in which to live for the next 10 to 20 years or more, compare apples to apples and choose the best value, not just the lowest price.

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