My experience over the past several months has revealed there is a major stigma with the ubiquitous short sale. When a client is informed of a great property and finds it will involve waiting for lender approval, they tend to wither.
If one can stand the emotional rollercoaster, there are countless reasons to put an offer in and simply wait for an answer (hopefully an approval). As you can imagine, there are also a few pitfalls that you may encounter...
First the good stuff:
1) Buyers are in a tremendous position of strength, especially if they have cash and excellent credit. Although, many of these deals can be put together with 5% down. Lenders love to see 750+ credit score buyers. Add 20% or more down and your competition dwindles.
2) The seller is taken completely out of the decision making process. Granted you're dealing with a different type of seller, namely a financial institution, or two, or three...
3) Typically, at least in the Boston area, these distressed sellers tend to be multi-family owners who have grossly overpaid for their home. With adjusting loans increasing monthly payments, offsetting rents are no longer enough to steady the ship. The rents are enough, in many cases, to create a positive cash flow or allow one to live rent-free.
4) Qualifying first-time buyers can take advantage of the $8,000 tax credit for 2009 assuming they will occupy the property as their primary residence.
5) Rates have recently dipped again...into the fours! A very recent client of mine snagged a 3-family with over 3,000 sq. ft. of living space, a two-car garage, an extra lot, new roof & windows, etc. With 20% down, a 30-year fixed 5.0% rate, and rent revenue over $2,000/mo she is living the dream!
Now the bad:
1) Real estate agents with poor management skills. Short sales require constant tending, living on the phone and fax. An absent-minded agent can wreak havoc with this type of transaction. That is when having an experienced agent representing your interests is critically important.
2) Banks, lenders, lien-holders, etc...At least they leave emotion out of a decision. Although they continue to appear to have little control over the tsunami of homeowners in default, they are getting better. Many allow online transactions. Others will get you an answer more quickly. Just be prepared for a wait, from 1 to 7 weeks depending upon the lender(s) involved.
So take it in stride and get in on the game. There is no pressure and no reason to stop your home search while your offer incubates. It will keep your mind off the waiting and who knows, you may soon find yourself in the home of your dreams!