Buying Distressed Property
What’s the difference between buying a “Distressed” San Diego home and a non-distressed home?
First, we need to define “distressed” as it’s used in today’s real estate marketplace. It doesn’t necessarily mean the house itself is distressed, although it could be.
Many of the “distressed” homes on the market today are in excellent condition and have been well-maintained by their current owners.
Instead it means that the home is either bank-owned or the sellers are offering it as a San Diego short sale because they owe more than its current market value.
A non-distressed San Diego home is one in which the seller has equity. To negotiate a purchase, you’ll negotiate with a seller who has the authority to make a decision without approval from his or her lender.
Non-distressed homes typically sell for a slightly higher dollar amount than distressed homes.
If you want to buy distressed…
Should you choose a short sale or a bank-owned home? Let’s look at the differences from the San Diego homebuyer’s point of view:
If that San Diego home is bank-owned:
- You will not receive a property condition disclosure
- The house is likely to be in poor condition.
- You’ll probably be able to close sooner than you will if you choose a short sale
Depending upon the bank’s policies, the attitude of the sellers when they left, and the length of the time the house has been vacant, the house could need some extensive cleaning and/or repairs. Some of those repairs may not become evident until after power and water services have been restored.
The sellers have not occupied the home – and have in fact probably never seen it. Thus, they can’t tell you about any problems that occupants have encountered. They won’t know if alterations were permitted – or if there have ever been alterations. There won’t be anyone to tell you how to operate the sprinkler system or which neighborhood kids can be hired to mow the lawn.
While knowing about problems ahead of time is a plus, your San Diego home inspector should be able to alert you to any defects. If alterations are evident, your agent can do the research to see if they were permitted.
Negotiations are slightly different from negotiations on a non-distressed home, because the listing agent will be dealing with a lender’s Asset Manager. The Asset Manager will probably have to obtain approvals from one or more investors before accepting your offer or presenting a counter-offer. This can add delays as you go back and forth.
Short Sales
In contrast to purchasing a bank-owned home, you:
- Will receive a property condition disclosure
- Will negotiate with the homeowner – and then your agreement will need to be approved by the bank
- Will usually have a homeowner on hand to explain how to operate that sprinkler system – and to tell you who to call for lawn mowing.
We know… You’ve probably heard nightmare stories about buying short sales. And they’re both true and unnecessary.
Short sales do take more time, but when the request is presented properly and paperwork is handled correctly, you should be able to close on a short sale purchase within 2-4 months. In contrast, you should be able to close on the purchase of a home from a non-distressed homeowner just as soon as your lender can process your paperwork – usually within 30 to 45 days.
While you’ve heard tales of buyers waiting 6, 9, or even 12 months to hear whether their short sale offer has been approved by the lender, this is due to the short sale listing agent not knowing how to present the package and not being persistent in follow-up.
Some delays must be expected, because as with bank-owned properties, the Asset Manager is required to gain approval from investors. However, approval should come in no more than 90 days. Inexperienced short sale agents are the reason why so many San Diego Short Sales fail to close.
Buying a San Diego short sale can be a wise financial move – but do expect to wait a little longer to close. And always work with an experienced short sale specialist.
The HaroDunlap Team has a 98% record of success in closing our short sale listings – and our short sale buyers’ agents are experienced in helping you present your purchase offer in a manner that both homeowners and Asset Managers will accept.
Have more questions? Call the HaroDunlap Team at 619-325-4170 or write info@harodunlap.com.
