Here is a good article from the Wall Street Journal on potential costs that may occur when buying a short sale.
There are some excellent points regarding costs to be aware of brought up in this article.
When buying a short sale you (or your agent) need to interview the listing agent, here are some questions:
How many short sales have you successfully negotiated over the last 12 months? Make sure the listing agent is experienced with short sales.
How many liens are there on the property? If there is is more than one lender the short sale process can take longer and you may be asked to contribute some money to satisfy the second lender.
Have you done a title search and are there any additional liens on the property? Some potential liens thay the seller's lender may be willing or not willing to pay are utility liens, IRS tax liens, HOA liens, etc. When submitting a short sale offer to the seller's lender for approval it is CRUCIAL to have all these costs accounted for upfront. If the short sale is approved and then there are additional liens uncovered that need to be paid it can be very difficult and time consuming to get the short sale approval updated with the additional costs being paid for by the seller's lender.
If there are condo or HOA fees, are they current? Some lenders will only pay 3-6 months of back HOA/Condo fees. Anything over that would have to be paid by the seller or buyer and in most cases the seller will not pay them.
When buying a short sale you also need to keep in mind that the sellers are in distress and might not be taking care of the house. A vacant house that has been empty for a while might have some unexpected problems. Make sure you hire a qualified home inspector and be aware that some of these issues may cause problems with your financing.
If you have any questions or want more information regarding short sales feel free to contact me.
Steve Capen & Associates
Keller Williams St. Pete Realty
Cell - 727-348-2211