Silicon Valley home buyers often “want a deal“, so they may consider purchasing a house, condominium or townhouse which is listed as a “short sale”.  What should you look for if you’re viewing one?

First, it is helpful to realize that the sellers cannot make any money at all from the sale, so often Los Gatos or San Jose area short sale sellers are unmotivated or depressed.  Sometimes they don’t even move themselves out of the way for showings.  A few months ago I saw one in which during a noontime previewing appointment in Willow Glen, two of the occupants were in bed (in two different rooms)!  Needless to say, I felt like I was imposing and left fast.  And I did not return with my buyer clients!

Second, with short sales, most often the sellers are truly distressed financially and the property may have been neglected or have deferred maintenance. Additionally, some sellers in this sad situation are emotionally upset or sad and they may not even keep the property clean. (When you go to see residential real estate, most often the sellers leave unless they are elderly or infirm.)

If you are really serious about buying a Silicon Valley short sale, you need to be able to “look past” things like the sellers hanging around, their dishes in the sink or their messes throughout the home. Beyond that, what should short sale home buyers look for?  There are issues both on site and beyond.  It is extremely helpful, before trying to buy a distressed property, to understand what a short sale is and who qualifies for one. Get educated, even before viewing these homes for sale!  There’s lots you’ll want to know before writing an offer.

  1. You want to know how many loans are against the property and if there are 2 or more loans, how many banks or lending institutions are involved. (It’s a lot easier to be successful with a short sale if there’s only one loan or 2 loans with the same lender.)
  2. If the real estate is a condo, townhouse or PUD, are there HOA dues which have been paid on time?
  3. Find out, with your agent’s help, if the property taxes have been paid.  It is helpful to know the total amount due.  Sometimes the seller or the seller’s lender will ask you, the buyer, to pay these back due items.
  4. Get your agent’s help in assessing whether or not the listing agent appears to have any experience with short sales.  These are not normal transactions and it helps a lot of the Realtor working with the seller knows what he or she is doing.
  5. If at all possible, try to learn what the “hardship” is.  If the hardship is not legit, it’s unlikely that the short sale will be approved!
  6. It is imperative to find out if there’s been a filing for either a Notice of Default or a Notice of Sale and when these happened (esp when the foreclosure auction or sale is supposed to happen). This can change how much time you have and whether or not it’s even possible to get an offer accepted before the lender takes it back in foreclosure.
  7. Property Issues
    With short sales there are usually no pre-sale inspections, so you must be extra diligent in your viewing of the house and yard. It would be wise to have money set aside for property repairs as the sellers cannot pay for needed work the vast majority of the time.  Here are a few items to watch for:Does the property appear to have deferred maintenance?

    • Are the sellers doing the regular upkeep, such as keeping the gutters clear of debris from tree leaves or needles?  If not, there could be expensive roof repairs needed as water may be backing up under the roof shingles.
    • Is there any cracked glass? If there are double pane windows, do any of them appear to have seal failure?  (Do the panes look cloudy or as if there’s moisture between them?)  If so, they may need replacing.
    • How’s the carpeting?  Is it clean and stain free?  It may need replacing.
    • If there’s a pool, how’s the water color? Is the filter running? Watch for cracked tile, gaps where masking is needed, and the need for re-plastering (which needs to be done about every 10 years.)
    • Are the fences in good repair?
    • Are there any bad odors at the property? Those can be hard to eliminate, particularly smoke, cooking and pet smells.
    • Have a look at the roof. If it’s a wood shake roof, are the shingles curled and split?
    • If there’s a fireplace, look up at the chimney stack to see if there’s a rain cap and spark arrestor.
    • Are the floors out of level?
    • Is the concrete driveway cracked? How about the walkways? If there’s hardwood flooring, is it smooth and even looking, or does it look cupped? Does the soil grading go away from the house?   Are the downspouts extended or does the water from the rain gutters dump out near the foundation? Beware water in the crawl space! Our expansive clay soils can be disastrous when water is involved, particularly under the house.
  8. When buying a distressed home, it is ultra important to inspect it very thoroughly!  It is critical to spend the money and time before you remove your contingencies so that you make an informed decision about whether or not you want to complete the sale.  Sometimes spending $1000 on inspections can save you many tens of thousands of dollars in unexpected repairs later on a home you’d have been better off not buying in the first place.

There will likely be other “red flags” to watch for.  Ask your agent to help you in identifying any unusual risks ahead of time so that you are as fully informed as possible.





  • Mary Pope-Handy

    Silicon Valley Realtor, selling homes in Los Gatos, Saratoga, San Jose, Silicon Valley, and nearby since 1993. Prolific blogger with a network of sites.

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