Buying a short sale means you are purchasing a home that the current owner is selling for less than they owe the mortgage company. In other words, it is when the seller comes up ‘short’ of the funds they need to repay their mortgage debt when selling their home. A short sale can be beneficial for the seller if it helps them avoid a total foreclosure on the property. It can also benefit the buyer because they stand to pay less for the home in general. However, they can also be a hassle because the negotiation process tends to be more complex, and buying a short sale can take longer longer to process.
Why is Buying a Short Sale Home Difficult?
Part of the reason a short sale can be complex and difficult to arrange is because everyone who is owed money, from the original mortgage lender to others with liens against the property, must agree to take less than they are actually owed. The government has tried to facilitate the process by offering lenders credit towards the balance owed if they agree to approve and move the short sale along.
You’ll want to make sure the seller has already looked into the process and understands what will be expected of them, in order for the sale to go through. If you are considering trying to sell your home via short sale, make sure you speak with your lender and understand the process and negotiations first. As a buyer, your best bet in terms of aiding the process is to make sure you are pre-approved for a loan and have a good agent who is comfortable with helping clients find and arrange short sale properties. Finally, it’s important for both buyers and sellers to keep in mind the sale may end up not being approved in the end.
If you are looking for a home at less than market price, buying a short sale is definitely an option, as long as you are prepared for a bit of a wait and a more complicated purchasing process. Other ‘discounted’ property options you may be interested in are REO properties and homes in foreclosure.