There are many pitfalls when buying investment property short sales.
I have said it before: I am done with Short Sales. Unfortunately, I feel like Al Pacino in the Godfather III when he says: “Just when I thought I was out, they pull me back in”. I consistently say that I am not going to sell my customers short sales. Unfortunately, the allure of the attractive pricing gets me every time. Here are some pitfalls that I have seen amongst deals that have closed and many that have not:
- The listing agent for an investmetn property short sale that my customer has under contract calls 2 days before closing, says there is a $3400 Minneapolis water bill on the property and the seller is NOT going to pay it. Listing agent asks if my buyer would take care of it!
- Buyer puts in full price, non-contingent offer on nice tri-plex in NE Minneapolis. Listing agent does a great job of communicating with us weekly. Countrywide goes through 8 BPOs, 4 negotiators, and countless phone calls. 6 months later, my buyer finally decides to cancel when they ask for another BPO.
- A deal had previously fallen through (because of buyer’s financing) on a townhouse in Apple Valley. Great agent does a good job of repricing the property at the previously accepted offer price. My buyer pays full price, no contingencies. Bank delays several times, sends someone out to do a BPO who promptly claims the property is worth 25% more than the list price (and 15% more than any recent sale in the neighborhood), bank cancels sale after 90 days in the process.
- Buyer is purchasing multi-family property. Seller has stopped caring about property and not collecting rent. Between the first showing and the offer being accepted, one unit becomes vacant. As part of our due diligence, we get copies of the rent rolls and the leases. None of the remaining tenants have paid any damage deposit and two are now more than two months behind in rent!
- Real Estate Agent markets property in Neighborhood with many foreclosures. She never tells me this is in fact a short sale until well after we have an accepted offer. At the closing, we find out the house was actually sold that morning to a land trust who in turn was actually the group selling it to us. They make a $25,000 profit on a $115k sale!
Investment property short sales can be great opportunities to buy investment properties at greatly discounted prices. You just need to be prepared for anything as it seems like they are making it up as they go.