BUYING SHORT SALES

If you’re interested in buying a property that’s listed as a short sale, here’s what you need to know.

How It Works

Unlike in a foreclosure, the bank does not own the property in a short sale. However, because the bank must approve the sale (because it is the lender, not the seller, who will be taking a loss on the property) it will seem like the buyer is purchasing the property from the bank. Short sale transactions, however, can be much more time-consuming and patience-testing than foreclosure transactions.

However, there are a couple of ways in which the purchase agreement you and your agent draw up are different. The contract will specify that the terms are subject to the mortgage lender’s approval. In a normal transaction, the only party who would need to approve the sale is the seller.

The contract should also state that the property is being purchased “as-is”. While it is acceptable to include language in the contract that allows you to back out of the deal if an inspection reveals considerable problems, in general, you should not expect the bank to lower the price to account for repairs if any problems are revealed. The bank is also unlikely to make any repairs, and the seller, being strapped for cash, is probably even less likely to help out. Given the situation, you’ll likely also need to have enough money for closing costs.

A Waiting Game

If you make an offer on a short sale property, be prepared to wait. Banks are notorious for taking as long as several months to respond to short sale offers. It’s hard to say whether this strategy will really spur the bank to action, but it may be worth it from your perspective if you can’t handle the stress of waiting months for a response. Clients find that wating for a short sale is well worth it as they are able to purchase a home for a sub-market price in exactly the area they have been targeting for years.