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First-time home buyers usually have to save up lots of money before they can buy their first house. This is why they may be inclined to buy short sales; homes that are sold below their original purchase price. The current state of the real estate market made short selling more widespread than it has been in nearly a decade, so first-time home buyers have plenty of properties to choose from. But buying short sales isn't without potential problems that can derail the entire deal and undercut the savings it was supposed to provide.
Finding a Short Sale
In most respects, buying a short sale is a lot like buying any other house. First-time home buyers can see which houses are on sale by looking up classified ads in local publications and on the Internet, consulting local real estate agencies or even driving around the area and seeing which homes are on sale. While some homes will be clearly advertised as short sales, others won't be as obvious. If the house has been on the market for more than half a year and/or if it had any price reductions, chances are pretty good that it's a short sale. Another tell tale sign is any mention of bank approval.
Making an Offer
Once the first-time home buyers settled on which short sale house they want to buy, their next step should be to make an offer. They must strike a careful balance. On one hand, because it's a short sale, they have room to maneuver during negotiations. On the other hand, they don't want to ask for something too low; the property owners know that they will face a loss, but they will try to minimize it as much as possible. The home buyers' best bet is to get the house appraised and figure out it's most current real estate value. This will be the average of the value range they should aim for.
Accepting Offers and Mortgage Lenders
Because they are selling the house below the original property value, chances are fairly good that the property owners wouldn't be able to repay everything they owe on their mortgage. Their mortgage lenders may be willing to settle a part of the debt so long as the home owners meet certain conditions. One of those conditions is that mortgage lender gets the final say over whether or not the property owner will accept the first time home buyers' offer and sell.
In other words, even if the home buyers and home owners agree on a sale price, the mortgage lenders can still prevent the sale from going through. They may either reject the offer outright or say that they accept the offer if the home buyer agrees to raise the price up to a certain point. Some of the less scrupulous mortgage lenders may drag the process out. That way, they will be able to wait for another potential buyer to come along even while they keep the original potential buyer as back-up. In the meantime, the interest rates will shift, and it won't necessary be in the buyer's favor.
If the mortgage lender rejects the original offer outright, the first-time home buyer can always make another offer. But, if the mortgage lender tries to stall or coerce the buyer into accepting it's terms, the buyer is better off looking elsewhere.
The Question of Inspections
The short sales home is less likely to be maintained than other types of homes. This is why it is especially important that the first-time buyers have an inspector look over it before the purchase agreement is finalized. However, both the property owners and mortgage lenders may be reluctant to allow that. If either of them insists on either not allowing or limiting inspections, the buyers are better off buying another property.
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