Why 'short sale' homes are tough to buy

We're finally hearing reports that the housing market may have turned. Prices are inching up. Sales are starting to improve.
    
So this could be a great time to snag a bargain home, especially one sold at distressed pricing.

Only problem: It's not always so easy, as one Norwood, Ohio home buyer found out.

Fell in Love...But

David Schucter fell in love with a traditional 3 bedroom house, with solid woodwork everywhere. He said "it's an incredibly valuable, you don't find this in newer homes anymore."

Best of  all, it was a "short sale:"  At just $65,000, it was almost half price of other homes in the area.

"This was just a great value home, 3 bedrooms, 2 baths, everything we were looking for as a future family," Schucter saud,

Short Sale Risks

In a short sale, the owner unloads the house for much less than it's worth, just to get out of an underwater mortgage. But Schucter soon learned some drawbacks.

He said "the bank took our initial offer and raised it several thousand dollars. They also said we would have to pay any closing costs, back taxes, and any liens on the property."

So he agreed in writing to all the bank's demands, but says after weeks of waiting, the bank shut him out.

"They gave us a counter offer, and we said we accepted their counter offer," he said.  But that's the last we actually heard from them."

Bankrate.com lists some of the downsides of buying a short sale:

    --There's an extended length of time to close, sometimes 6 months or longer due to all the legal issues.

    -- The house is SOLD "as is," with no warranty.

    -- You are responsible for all unpaid water and other bills, back taxes, and liens from contractors or towns.

    --It may be neglected and need major repairs.

    --And cash talks, which is what happened here according to the listing realtor.    

The Realtor told us the home had several offers, and the bank representing the seller ultimately went with a cash offer.

The bank would not comment on the case, only telling us it would "re-examine" why Schucter was denied.

 All Schucter can do is think about what could have been. "The term short sale is one of those ironic terms where its not short at all," he said.    
    
Advice to Buyers

If you are trying to purchase a short sale (or foreclosed property, which is similar) you want the biggest down payment possible.

You also may want to speak to a lawyer, or at least have one in your back pocket.

They may be able to ask the right questions and get the wheels moving if the bank suddenly gets cold feet.

As always, don't waste your money.