You’re probably just a little giddy at this point. You’ve made an offer on a short sale property at a price well below the market value, and it looks like a sweet – and potentially very lucrative – investment deal. Still, there are a few things you need to know about short sale inspections in New York before you take that final step.
Short sales can be a great boon for investors – or they can be a giant money sink. It’s up to you to do your inspection-related due diligence.
Don’t Neglect It
In their eagerness to close the deal on a cheap piece of property, some buyers skimp on the inspection or skip it altogether. This is a grave mistake. Usually, short sale sellers are cash strapped and have let the property upkeep go for some time. Some, in their frustration and anger, have even damaged the property in an attempt to get some revenge for losing it. So, obviously, an inspection is a must.
More important, though, are the specialized inspections that many short sale buyers aren’t even aware they need. You’ll need more than an inspector who does a quick walk-through looking at some plumbing and wiring.
You will need, for example, specialized and specially trained inspectors to look for potentially expensive problems like hidden termite damage, mold problems, and/or deep structural issues. And be aware that for these specialized inspections, there are both quality inspectors and those not-so-good ones. So be sure to get recommendations and references.
Do It Early
Of all the things you need to know about short sale inspections in New York, this one probably causes the most debate. Should you spend money on inspections when you don’t even know whether your offer will be accepted? Or should you wait until you know the money won’t be wasted, but when the opportunity for bargaining leverage has passed?
Many times, the buyer’s agent will request that the buyer is allowed to inspect the property after the lender’s short sale approval, thus allowing the buyer to back out if the inspection turns up too many troubling issues. The problem here is that, at this late hour, the inspection is sometimes rushed, and the buyer’s negotiating leverage has slipped away.
Short sales are usually done on an as-is basis, so there isn’t usually any chance to negotiate and figure repair costs into the sale price. Still, there is sometimes a slim chance for this. So, the best policy is to have inspections done early on.
Don’t Rely on the Disclosure Alone
In a disclosure form, sellers list every problem with the property they are aware of. The problem here, though, is that there is usually some dissembling and hiding of problems, especially those stemming from owner neglect and abuse. But even if a seller tries to give you an accurate, honest account, you still probably won’t know the property’s real condition – because the seller isn’t a trained inspector.
The solution to this dishonest- or inadequate-disclosure problem is for you to tag along on the general inspection. Ask the inspector questions about any problems you’ve already detected. And when the inspector discovers and notes a problem, ask him what it would take to rectify the problem. (This may point up areas and issues that require those specialized inspections.)
Also, you need to be aware that short sale disclosures won’t address major problems that lie outside the property – problems that could spell ruin for your investment. You wouldn’t want to buy a short sale property and then find out that it was about to be situated next to a newly commercially zoned area or that it is located in a flood plain.
A short-sale property can often be a sound investment, but it can also be a huge money sink. Just be sure to keep in mind these things you need to know about short sale inspections in New York.