As happy as I’ll be when the day comes that I don’t have to do anymore short sales, the fact is that I am in the midst of several. And even though the public by and large understands what short sales are about now more than they did 2 years ago, questions remain, such as how to address physical issues with the property.
- Issue: FHA appraisal. The appraisal flagged the rotting wood on the rear deck. The seller has no equity or proceeds to address the matter. If the buyer wants to close on their FHA loan, they’ll have to fix this themselves. Don’t feel sorry for them; the price of the home more than takes into account the condition and repairs required for this home.
- Issue: Buried oil tank. These are cash buyers, but they want an above ground oil tank. The seller has no equity or proceeds to address the matter. If the buyers want the oil tank removed and replaced, they’ll have to do it themselves. Again, the price of the house more than compensates for the cost of this work.
- Issue: Broken pipe. This past winter, we found a leak and shut the water off at the street for this vacant home. These buyers want the water turned on for the inspector. I can appreciate that. But if we turn the water on, the house will flood. The house is, again, priced tens of thousands less than other comparable homes in the complex.
“As is” may not be a comfortable term for some people, as they are averse to risk. I understand that. But I also understand that purchase prices for the 3 above mentioned homes are very low. That’s the upside. Prior to making offers (and signing contracts) home buyers should understand that while foreclosures and pre-foreclosures are priced enticingly, they are cheap for a reason. In those cases, the sellers, either a bank or distressed seller, cannot remediate the matter. Those matters are the buyers responsibility, and that might require a rehabilitation mortgage, cash purchase, or a little sweat equity prior to closing. It is worth it, but caveat emptor.