Low interest rates have home sales really picking up steam lately, but a depressed economy and underwater mortgages have left many struggling homeowners with little option other than a short sale. A short sale is the sale of a property in which the proceeds from the sale fall short of the balance owed to the lienholder of the property. Both banks and property owners may prefer a short sale over a foreclosure because it mitigates additional costs incurred as a result of foreclosure proceedings.
Short sale homes are typically maintained better than a foreclosure because they may not be vacant or have had appliances and fixtures removed from the home. However, there are some costs related to this process, such as insurance that must be pair or repairs due to a lack of regular maintenance that wasn’t kept up by the previous owner.
If you’re pursuing a short sale to get a good deal, be aware that a closing in 30-45 days will be very unlikely. Sometimes this process can take 3-4 months, or even longer. Do your research. Have your agent check public records to find out whether a foreclosure notice has been filed, this can help you determine how much to offer. Finding out whether there are one or two loans on the property. If the first mortgage is for $160,000 and the second is for $40,000, offering $160,000 leaves no room for the two lenders to come to an agreement on who gets what.
Sit down with your agent and write an offer to the seller that is contingent upon the lender’s acceptance. If the seller agrees to your offer, it is then submitted to the original lender. Give the lender an appropriate timeframe in which to respond (2-3 months), after which, the offer is automatically cancelled. Reserve the right to conduct a home inspection, but be aware that the lender will not offer to pay for anything that a seller typically pays for. You are purchasing a property “as is”.
Making a short sale purchase work for you boils down to your bottom line. You’re buying a property at substantial savings, but it will take longer than a traditional purchase, and that’s only IF the lender is willing to negotiate a short sale. Happy Home Hunting!