How to Buy a Short Sale Property

Similar to buying a foreclosure property, the purchase of a short sale property can offer significant cost savings, as well as the potential for headache. A short sale property is a home facing foreclosure, but the lender has not yet taken ownership of it. A short sale allows the homeowners to sell the property for less than they owe on the home loan rather than going into foreclosure, which is more damaging to a credit report. The following will help you understand how to buy short sell property.


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    Prepare for a long process.
    • The term “short sale” can be misleading in that it implies a short selling process. In reality, it can take months before the offer is even considered. In a short sale, the lender must approve the final amount even though it is the homeowners who are doing the leg work of the sale. Lenders typically move much slower than traditional home sellers do.
    • If you need to purchase the home by a specific date, or need to move into the home by a specific date, buying a short sale property is probably not the best option.
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    Search for short sale properties with only one mortgage.
    • Working with two lenders can be much more difficult than working with only one lender to approve a short sale. It’s not impossible, but the approval process will depend entirely on how well the lenders work together.
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    Ask the selling agent for recent sales of comparable properties in the area.
    • Knowing the value of comparable homes will help you determine your offer and can help the process move much quicker by eliminating the need for multiple counter-offers.
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    Offer a reasonable price when attempting to buy a short sale property.
    • Although the lender has the final say on the property’s sale price, the original asking price is set by the seller and may be significantly lower than what the lender will accept. If you lowball the asking price, the lender may disregard your offer entirely.
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    Look at multiple properties while you wait.
    • Setting your hopes on one home can be incredibly discouraging, even when you’re not attempting to buy a short sale property. While you’re trudging through the short sale process on one home, you should feel free to look at other properties and even make offers on them if your state laws allow it. Your real estate agent can help you understand the local laws and contingencies when making multiple offers.
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    Know whether the property is an approved short sale.
    • In an approved short sale property agreement, the lender and the seller have already agreed to sell the home for less than the amount owed on the loan, and typically, the lender has predetermined what price is acceptable. Contrarily, a homeowner may approach the bank with an offer in hand and then attempt to negotiate a short sale.
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    Hire a home inspector to look at the property.
    • Short sale properties are generally sold as-is. Before you come to the closing table, you should know what repairs the property would need after you take possession.
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    Finalize your loan paperwork immediately after escrow opens on the property.
    • Short sales must be closed on time, unlike a traditional sale which typically has leniency. Buyers should aim to have their loan finalized the week before the closing date.
    • If there is an issue that is going to affect the closing date, immediately put in a request for an extension with the homeowner’s lender, but be aware that it might not be granted.

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Categories: Buying Property