LOS ANGELES—As the market improves so do the opportunities to find a great piece of property suited to you. Short sales are one way to find a nice home as a primary residence or as a rental property.
Short sales, of course, are properties being sold by distressed owners at potentially a great discount. Since the sale price falls short of the amount owed, these sales are called ‘short sales.’ The process can take months. Be patient, wait it out and you’ll reap the benefits.
The key to a successful buy in a short sale is to be meticulous in your due diligence. Remember, the property is “as is” or in its existing condition. Its owner will not make repairs or improvements to help sell the property. So hire an inspector to examine it with a proverbial fine-toothed comb and leave nothing to chance or it could cost you dearly.
A good inspector will look past such things as dirty floors, dusty cabinets and clutter. Clutter can be picked up. Floors can be washed. Too many potential buyers pay too much attention to these details and walk away from a potentially nice home simply because it looks messy.
An inspector will look instead at the real problems a house could have such as water or mold stains on walls, carpeting, floors, cabinets and even furniture. All these could be tell-tale signs of leaky or broken pipes or pipes about to burst.
When you look outside, the same is true. An inspector will look for water stained walls, water puddles or muddy ground or saturated grass area which could mean leaky or broken pipes and sewer lines. Either way, these may be major problems that must be dealt with and could cost thousands of dollars if it means re-piping or replacing expensive underground waste lines.
In a short sale, you also must be properly capitalized or financed and ready to spend on needed repairs to get the home in good condition. You don’t want to start repairs then have to abandon them because you ran out of money. Nobody wants to live in a house needing lots of repairs.
Be ready for anything when it comes to a short sale. Even as you make your plans to repair and remodel your potential new house, you may run into potential problems that could derail the sale for good. It could be anything from highly expensive roof repairs to the discovery of a crack in the foundation of the home – both potential deal breakers. So be ready to walk away from the deal if you have to. Until you have the keys to the house in your hand, the sale hasn’t closed.
Be sure you have flexibility in the time needed to close the sale. This would allow for enough time to move and for you to prepare for the needed upgrades and repairs to the home.
Work with a good real estate agent experienced in short sales. Experience is a must if you’re going to buy short. Your agent should know the market and understand the latest trends and nuances.
But in the end, short sales can be very rewarding and offer you deals you may not otherwise find in the general real estate market. Finding great deals in short sales can be a challenge as the market continues to improve, but they are out there nonetheless. So consult with your agent about your needs and see if buying short is in your future.
David Rosenfeld is a Real Estate broker and president of Advantage Real Estate, a Real Estate and investment firm in Santa Monica, and a Rotary Club member. He has more than 20 years experience in commercial and residential property investments and financial counseling. He can be reached at 310 450-4488, at **@ad******************.comand at www.advantage-realestate.com.
By David Rosenfeld