How to Buy a Short Sale

Patience is the key in buying a short sale property. The seller's acceptance is subject to the approval of the lender who holds the mortgage. There can be substantial discounts off the market value, but you may be waiting a few months for a response. Here are some suggestions in buying a short sale:

1. You should work with a Realtor® who has experience in negotiating with banks for short sales. The agents who have worked for both sellers and buyers have a good insight into the process. Their help will be of great value.
2. The property ideally should not have more than one lien holder. This means no second mortgage, no outstanding property tax certificates and no PMI (purchase mortgage insurance). All these additional lien holders want their money and they rarely agree.
3. Determine the fair market value of the home by examining sales of similar properties in the neighborhood within the last three months. You should also consider comparable pending and active listings
4. An inspection of the property by a qualified and licensed home inspector or contractor is strongly suggested. Whether this home has been vacant for a few weeks or many months, problems may exist that could prove extremely costly. Carefully consider the condition of the home. Will the sale price and the repair cost exceed the market value?
5. Make sure you have your financing in order before you place an offer and submit a pre-approval letter with your offer. The current lender might offer you an attractive rate in order to reduce its' loss on the property.
6. If you find yourself in a multiple offer situation, place your highest and best offer up front.
7. Wait! The process from offer to acceptance is “subject to third party approval” and the time frame for a response should be extended quite a bit.
8. Once you offer has been accepted, the lender will be anxious to proceed to close the transaction as quickly as possible.

Buying a short sale is not for the faint of heart. This process can tie up an escrow deposit for several week to a few months. And the value of the property might be different from the time an offer is submitted until the closing.

For more information about short sales in our area click here.