Is it possible to buy a short sale home

The owner will illustrate to the lender the extent of their financial distress through documents that may show a recent loss of employment, divorce decree, or bank statements.

After the lender agrees to move forward, the homeowner is responsible for finding a buyer. In a foreclosure, the lender initiates the process, essentially seizing the home after the owner has failed to make payments. The foreclosure process is generally faster than a short sale, as the lender seeks to liquidate the assets as quickly as possible. In many cases, buying a short-sale property can be advantageous for prospective buyers. However, it is important to be aware of some of the drawbacks involved.

Short sales can take a long time, with lenders sometimes taking months to approve the transaction. After the seller's approval, it may also take many weeks for the bank to approve the price. If the bank believes that a foreclosure proceeding is more lucrative, it may reject the short sale and move forward with foreclosure instead. A short-sale property can provide an excellent opportunity to purchase a house for less money.

In many cases, short-sale homes are in reasonable condition, and while the purchase price might be higher than a foreclosure, the costs of making the home marketable can be much lower, and the disadvantages to the seller less severe. However, because of the lengthy process, buyers and sellers must be willing to wait. An experienced real estate agent can help you determine a fair offer and negotiate with the bank.

While many investors purchase short-sale properties and quickly resell them for a profit, others choose to maintain ownership and use the property for income by collecting rent. In either case, each property must be carefully evaluated prior to purchase to determine if it has profit potential. Because tax laws are complicated and constantly change, it is always recommended that you consult with a certified public accountant CPA who knows about real estate investing and related tax laws to give you comprehensive and up-to-date information.

It can mean the difference between making a profit and taking a loss on an investment. Freddie Mac. Fair Isaac Corporation. Rocket Mortgage. A Guide To The Process. National Association of Realtors. Purchasing A Home. Home Ownership.

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Your Money. Personal Finance. Your Practice. Popular Courses. Home Ownership Selling Your Home. Part Of. Getting Ready to Sell. Selling Strategies. Real Estate Agents. The Owner-Seller Option. The Selling Process. In addition, if there are multiple liens on the property, you will have to get the acceptance of all the lien holders.

The first lien holder may accept the offer, but the second or third lien holder may reject it, so there will be more hurdles to getting the short sale approved. Short sales present another risk because the lengthy short sale process could cause you to miss out on other potential purchases. With all your time and resources tied up in short sale negotiations for months, you could miss out on an even better investment opportunity. Sellers attempting to negotiate a short sale are usually experiencing some sort of financial hardship.

Therefore, they may not have the money to do upkeep on their property. This inability to keep up with maintenance may be obvious, or it may lie deeper in structural, electrical or plumbing issues. It is therefore extremely important to get a home inspection so you can uncover any major issues the property may have. Just because someone advertises a property as a short sale does not mean they have been approved for one. They may think they qualify for a short sale, but unless they are actually approved by the bank or mortgage lender, this classification means nothing.

Before getting involved in a short sale, you should always verify that the seller has been approved by their lender for one.

If they have not, you could be wasting your time or could become involved in a process that will draw on for months or even a year. Another risk of a short sale is losing out on the property to an all-cash buyer or a buyer who is able to put down a large down payment. Offers submitted: Lenders only consider one offer at a time. If your sale is contingent on one currently under review falling through, you could be in for a lengthy wait. Number of lienholders : A seller who has additional liens, such as from a second mortgage or unpaid homeowner association dues, must get all the lienholders to sign off after the primary lienholder approves the sale.

To give you a sense of how long that might take, note that the standard short sale addendum used in New Jersey allows up to 90 days for these additional approvals.

Here are the advantages and drawbacks to consider before buying a short sale home: Pros Cons Potential to get a great deal on a home. To avoid foreclosure, the seller needs to sell the home quickly. Can take a long time. The waiting period to receive short sale approval could take months.

Home is likely to be in better condition. A homeowner in foreclosure has nothing to lose by letting the home fall into disrepair. With a short sale, the homeowner wants to sell before the lender forecloses, for a price the lender will accept, and that means the home must be in good shape.

Seller is unlikely to make repairs. In traditional sales, buyers and sellers can negotiate repairs. With a short sale, the lender usually insists that the home be sold as-is, meaning you could be buying a fixer-upper. Fewer buyers to compete with. Less competition means you have a better chance of having your offer accepted.

Requires lender approval. How to buy a short sale home in 6 steps Buying a short sale home is similar to buying a regular home. Tip: You can take a more proactive approach by contacting the owners of homes in danger of foreclosure before they list the homes for sale.

Each of these sellers will have received a notice of default from their lender. Good to know: More lienholders might reduce the chance that a short sale will be approved, and they almost certainly will extend the time it takes for the seller to get final approval for the sale. Tip: You can speed the pre-approval process along by having your documents ready to submit to the lender. Just because a home is listed as a short sale doesn't mean it's really for sale because it's subject to lender approval , nor does it mean it will sell at the advertised price.

Here are six things you need to know before trying to buy a short sale. The short sales I list in Sacramento are all priced below comparable sales , yet they are priced in line with pending sales. Because short sales take anywhere from two to four months, on average, to close, and pending sales will become the comparable sales at closing. Some short sales are priced extremely low. So low that the sellers' bank will never accept them.

These types of listings receive multiple offers. But all is not lost. It will need to be priced near market value to get your offer accepted. If you're not prepared to pay above a superficial price on a lowball short-sale listing , then pass.

Ask your agent to research how much is owed against the home and find out the number of loans that are recorded. A second or third mortgage lender will receive peanuts as compared to the amount a senior lender in first position will get. Moreover, some lenders, deserving or not, get a reputation for being difficult to work with. If your agent is an experienced short sale agent , he or she will know who these lenders are and can advise you of the difficulty you may encounter.

A listing agent who is advertising a short sale but has never closed a short sale is a risky proposition for you. That's because it's up to the listing agent to submit the short sale package to the lender and negotiate.