Short Sales for Buyers.
Thinking of Making an Offer on a Short Sale? What You Need to Know
Are you looking to buy a new home? Are you thinking that now's a great time to find bargains? That's true, but it pays to know a little about the seller's situation before you make an offer.
If a home is being sold for below what the current seller owes on the property-and the seller does not have other funds to make up the difference at closing-the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.
A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.
You're
a
good
candidate
for
a
short-sale
purchase
if:
.
You're
very
patient.
Even
after
you
come
to
agreement
with
the
seller
to
buy
a
short-sale
property,
the
seller's
lender
(or
lenders,
if
there
is
more
than
one
mortgage)
has
to
approve
the
sale
before
you
can
close.
When
there
is
only
one
mortgage,
short-sale
experts
say
lender
approval
typically
takes
about
two
months.
If
there
is
more
than
one
mortgage
with
different
lenders,
it
can
take
four
months
or
longer
for
the
lenders
to
approve
the
sale.
.
Your
financing
is
in
order.
Lenders
like
cash
offers.
But
even
if
you
can't
pay
all
cash
for
a
short-sale
property,
it's
important
to
show
you
are
well
qualified
and
your
financing
is
set.
If
you're
preapproved,
have
a
large
down
payment,
and
can
close
at
any
time,
your
offer
will
be
viewed
more
favorably
than
that
of a
buyer
whose
financing
is
less
secure.
.
You
don't
have
any
contingencies.
If
you
have
a
home
to
sell
before
you
can
close
on
the
purchase
of
the
short-sale
property-or
you
need
to
be
in
your
new
home
by a
certain
time-a
short
sale
may
not
be
for
you.
Lenders
like
no-contingency
offers
and
flexible
closing
terms.
If
you're
serious
about
purchasing
a
short-sale
property,
it's
important
for
you
to
have
expert
assistance.
Here
are
some
people
you
want
to
work
with:
.
Experienced
real
estate
attorney.
Only
about
two
out
of
five
short
sales
are
approved
by
lenders.
But
a
good
real
estate
attorney
who's
knowledgeable
about
the
short-sale
process
will
increase
your
chances
getting
an
approved
contract.
Also,
if
you
want
any
provisions
or
very
specialized
language
written
into
the
purchase
contract,
a
real
estate
attorney
is
essential
throughout
the
negotiation.
.
A
qualified
real
estate
professional.*
You
may
have
a
close
friend
or
relative
in
real
estate,
but
if
that
person
doesn't
know
anything
about
short
sales,
working
with
him
or
her
may
hurt
your
chances
of a
successful
closing.
Interview
a
few
practitioners
and
ask
them
how
many
buyers
they've
represented
in a
short
sale
and,
of
those,
how
many
have
successfully
closed.
A
qualified
real
estate
professional
will
be
able
to
show
you
short-sale
homes,
help
negotiate
the
purchase
when
you
find
the
property
you
want
to
buy,
and
smooth
communications
with
the
lender.
(All
MLSs
permit,
and
some
now
require,
special
notations
to
indicate
that
a
listing
is a
short
sale.
There
also
are
certain
phrases
you
can
watch
for,
such
as
"lender
approval
required.")
.
Title
officer.
It's
a
good
idea
to
have
a
title
officer
do
an
initial
title
search
on a
short-sale
property
to
see
all
the
liens
attached
to
the
property.
If
there
are
multiple
lien
holders
(e.g.,
second
or
third
mortgage
or
lines
of
credit,
real
estate
tax
lien,
mechanic's
lien,
homeowners
association
lien,
etc.),
it's
much
tougher
to
get
that
short
sale
contract
to
the
closing
table.
Any
of
the
lien
holders
could
put
a
kink
in
the
process
even
after
you've
waited
for
months
for
lender
approval.
If
you
don't
know
a
title
officer,
your
real
estate
attorney
or
real
estate
professional
should
be
able
to
recommend
a
few.
Some
of
the
other
risks
faced
by
buyers
of
short-sale
properties
include:
. Potential
for rejection. Lenders want to minimize their losses as
much as possible. If you make an offer tremendously lower than the fair
market value of the home, chances are that your offer will be rejected and
you'll have wasted months. Or the lender could make a counteroffer, which
will lengthen the process.
. Bad
terms. Even when a lender approves a short sale, it could
require that the sellers sign a promissory note to repay the deficient
amount of the loan, which may not be acceptable to some financially
desperate sellers. In that case, the sellers may refuse to go through with
the short sale. Lenders also can change any of the terms of the contract
that you've already negotiated, which may not be agreeable to you.
. No
repairs or repair credits. You will most likely be asked to
take the property "as is." Lenders are already taking a loss on the property
and may not agree to requests for repair credits.
The risks of a short sale are considerable. But
if you have the time, patience, and iron will to see it through, a short
sale can be a win-win for you and the sellers.
* Not all real estate practitioners are
REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS®
and is bound by NAR's strict code of ethics.
Note: This article provides general
information only. Information is not provided as advice for a specific
matter. Laws vary from state to state. For advice on a specific matter,
consult your attorney or CPA.