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Everything You Need to Know About Short Sales

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Everything You Need to Know About Short Sales

Are you interested in buying Chicago investor real estate to diversify your portfolio, create another stream of income or flip to make a quick profit? You have several options when it comes to buying investment property such as publicly-traded REITs, buying residential or commercial properties to renovate, renting out or flip, or getting involved with real estate crowdfunding platforms.

All can be lucrative investment sources as long as you work with an experienced Chicago investor real estate agent at Dior Realty Group and know exactly what you want when it comes to the investing experience.

An option that is gaining popularity with investors in the Chicago real estate market is to buy short sales to flip or renovate to turn into rental properties or turn around and sell for a larger profit. Want to know more? Here’s everything you need to know about this investment opportunity.

What is a short sale?

When a financially distressed homeowner decides to sell their property for less than what they owe on their mortgage, it is referred to as a “short sale.” Unlike a repossession or foreclosure, the buyer of the property is not the lender or bank. Instead, it’s a third party interested in Chicago investor real estate.

All the money paid by the third party goes toward the mortgage and the lender then has the option to forgive the remainder of the balance or to continue to pursue the rest of the money through a deficiency judgment. A seller may choose to do a short sale rather than go through foreclosure as the financial consequences for them are usually less severe.

It is up to the mortgage lender whether or not to approve a short sale. The lender will require documentation from the homeowner regarding why a short sale makes sense in a particular situation. Unlike what the name implies, a short sale is usually a lengthy process — taking up to a full year to process in some situations— and involves a lot of paperwork. However, they can be beneficial for the homeowner, the lender, and a buyer who is interested in Chicago property flipping or other types of investment real estate.

Dior Realty Group has the tenured experience to confidently help you navigate this unique situation for a smooth transaction.

The benefits of short sales for buyers

Obviously, one of the biggest benefits of buying short sales is that you can get a home for less than what it is worth. Another benefit of buying short sales is that you will face less competition than if you try to buy a traditional home. The agents at Dior Realty Group know the ins and outs of short sales, and now might be the perfect condition to explore this type of transaction.

Chicago has had one of the hottest real estate markets in the nation for several years and many investors are frustrated by the lack of inventory to choose from. Because short sales are not a traditional type of real estate transaction, only a select few interested in Chicago property flipping or taking a chance on a short sale will compete for these homes.

The drawbacks of short sales for buyers

Short sales are not without their risks and drawbacks. When you buy a short sale, you are buying it as-is. Because owners of these properties are in financial distress, they may have neglected to make needed repairs or do regular maintenance on the properties. In addition, banks are not required to disclose information to Chicago investor real estate buyers as they would be required to in a traditional property sale. Sellers of these properties do have to complete a disclosure form, but buyers will not get as much information about the property in a short sale as they would in a traditional transaction.

Because of this, all buyers of short sales should have a home inspection completed on the property before they sign on the dotted line. Keep in mind that sellers will likely not be willing to make any needed repairs that show up in the inspection, but at least you’ll know what condition the home is in before you buy.

Another potential issue with short-sale homes is financing. Some lenders will not lock in a rate for your loan for longer than 30 days for a short sale without charging the buyer extra fees. Those interested in Chicago investor real estate in the form of short sales may also have to wait longer for approval of their loan or have to abide by VA loan or FHA repair guidelines that can require significant repairs.

Who short sales are good for

In general, short sales can be lucrative opportunities for those who have plenty of time and money to put into Chicago investor real estate. They can be ideal for those interested in Chicago property flipping and who enjoy the challenge of a fixer-upper. However, a short sale is likely not a good choice for someone who is looking for a primary residence and who needs to close on and move into a new home as quickly as possible. Not only could buyers have to wait months to get approval on a loan, but they could also be faced with repairs that make the home unlivable until significant work is completed.

Tips for finding and buying short sales

If you are new to Chicago investor real estate and interested in short sales, it’s vital that you work with a local real estate agent who is experienced in these types of transactions. An experienced agent can help you spot good deals, help connect you with financing options and other professionals you may need assistance from, and guide you when it comes to making an appropriate offer on this type of non-traditional real estate.

Are you interested in Chicago property flipping or want to explore other investor real estate options? Reach out to the trusted agents at Dior Realty Group for expert guidance throughout the entire search and buying process.

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