Julie Fontaine asked: First time home buyers should love short sales, despite all the rumors that may be in the market. Most complaints about short sale, particularly in the San Diego market, generally come from the lag time between when an offer is put on the house, and when the bank gives the green light on the price. Gone are the days that an offer is made and 3 days later it is either accepted or rejected when it comes to short sales. First time home buyers have many reasons to love short sale, and need to understand the opportunities and pitfalls that may arise from a short sale purchase. Here are a few reasons why a first time home buyer should love short sales:
1. Bargain Home Prices. Home prices, at least in the San Diego market are at all time lows. The purchase of a short sale will allow first time homeowners to benefit from an affordable monthly mortgage. It is often possible even to purchase a home at a price lower than fair market value.
2. Up to $8,000 in Tax Incentives. The Making Home Affordable Program allows for a tax credit up to $8,000 for first time home buyers. This is a savings right off your bottom line, making homes even more affordable, particularly in San Diego where we work. First-time home buyers may benefit from tax incentives, grants, down payment assistance and other financial incentives when purchasing a property through a short sale.
3. Lower Taxes & Insurance. Property taxes are assessed based upon the purchase price at the time of sale. Taxes and insurance represent a significant portion of the annual housing expense. Purchasing a short sale property at today’s bargain prices may result in dramatically reduced taxes and insurance rates. Thanks to California’s Proposition 13, taxes will remain at record lows for the duration of your ownership in this home. The savings will live on.
4. Motivated Sellers. As home prices continue to decline and homeowners are seeing their equity position diminish further and further, homeowners are motivated to sell. Many short sale situations are homeowners already facing foreclosure and they are in a race to beat the foreclosure clock. For many facing foreclosure an offer on the house may provide and emotional relief as they see the foreclosure date approaching. The bank will postpone the foreclosure if they see a reasonable offer on the table. This may also allow additional time for the homeowner to stay in the house while the short sale is being negotiated. There is nothing short in the time frame of a short sale, so buyers and sellers should anticipate hanging in their until bank approvals are procured.
5. Affordable Interest Rates. Despite the financial crisis in the banking industry, mortgage rates are still low. Hovering around 5.5 percent, home ownership is still extremely affordable, often time more affordable than renting! A home bought for around $135,000 would result in a total monthly payment, including taxes and insurance, to around $1,000! You can barely rent a one bedroom condo for that in Southern California! You can fix your monthly payments, while building future equity through loan amortization and future appreciation.
6. Negotiable Extras. Motivated sellers will often sweeten the pot by throwing in extras such as a jacuzzi, flat screen TV, and furniture they may no longer need or have room for in their next place. Don’t be afraid to negotiate appliances or other extras as part of the negotiation process. I’ve seen boats, antiques, appliances and even a motor home acquired by just asking for it!
7. Buying As-Is With A Discount. Most short sales are sold “as-is” with no repairs made by the seller. Be sure to have a home inspector lay out any problems with a home and get an estimate for that work. Ask for a discount on the purchase price of the house for that defrayed maintenance cost. First time buyers can score big on those discounts. By doing the work yourself, you can save thousands of dollars. Simple tasks such as painting, yard work and other minor repairs that can be done by the new home buyer can create instant equity in the home.
Natalie
