Buying A Short Sale Tips

Buying a short sale investment property can get you a killer deal. But be careful. The short sale process doesn't always result in a profitable investment.

To make sure, therefore, that your short sale purchase saves you money, consider using the following tips:

Tip #1: Pay Less than Zillow and County Assessor Value

In many areas of the country, short sale properties can sell at a substantial discount from the fair market values that traditional, non-short-sale properties sell at. This discount, probably, explains why you're even considering a short sale property

But you want to make sure you get the discount. Probably the most objective way to do this is to look at what an automated appraisal service like Zillow dot com values a property atand then offer less than this number.

Alternatively, you can also in some states look at the assessed value and then, assuming assessments are based on market values, offer less than the assessed value.

In most areas, short sales represent only a fraction of the actual sales volume. Accordingly, short sale properties should sell for "below average" prices, just as traditional properties should sell logically for "above average prices."

Tip #2: Get an Inspection Early and Talk to Contractors

Because of the way the short sale process works, you usually shouldn't do your only inspection late in the process. And here's why: You can't do the inspection the week before closing and then as a result of new information say to the bank and the seller, "Oh, you know what? Inspector says furnace needs to be replaced I need you to knock off $5,000 for that."

To deal with this possibility, consider doing a thorough inspection early and then follow up by getting contractor bids on any repairs that need to be made.

In this manner, you can nail down cost estimates for needed repairs and adjust your offer price accordingly. By the way, inspector reports and contractor estimates are also great ways to provide hard evidence justifying a deeper discount.

One other observation relevant to this point: With short sale properties, unfortunately, repairs often have been deferred. And worse, properties in some areas can tend to get stripped of fixtures like lights, fans, and appliances (including those built into the house). Be sure to consider these factors too

Tip #3: Don't Lock Yourself into a Financial Commitment

A third, final tip: Don't lock yourself into buying a particular property.

Because short sales typically take so long to close, lots can happen between the time you look at a house and the time you might be able to close. If something happens during that lag that changes the attractiveness of the deal to you, say squatters move into a property or pipes freeze or the lawn and shrubs die of drought, you don't want to lose money by walking.

Accordingly, don't make choices that lock you into a deal. Keep your short sale options open.