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Health & Fitness

Buying a Short Sale

There are many misconceptions surrounding short sales, but if handled properly the process can be smooth, it just won't be short.

A property listed as a short sale indicates the seller’s lender is willing to accept less than the total amount due on the mortgage. In order for a property to qualify as a short sale a few things may have happened: the market value of the home has dropped below what is owed to the bank, hard comparable sales show the home is worth less than the unpaid balance on the mortgage, the mortgage may be near default, and/or the seller has fallen on hard times. 

Many buyers think a short sale is a way to get a killer deal. Generally, this is not the case. The bank is looking to secure a sale at or close to current market value. However, if you understand the process and have some time, you should not be discouraged from making an offer on a home you like just because it is a short sale.

Here are a few of the basics to be aware of if you are considering making an offer on a short sale.

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Short Sales Take Time

Making an offer on a short sale requires more paperwork, more people, and therefore more time. Experienced short sales agent will tell you to prepare for the process to take 90 days. The clock begins once the lender, not the seller, has received all the necessary paperwork. 

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Know the Facts

Prior to making an offer your agent will check the public records to confirm who has title, if the home is already in the foreclosure process, and how much is owed to the lender. If there is more than one loan on the property the process becomes a bit more complicated.  

Know the Market Value

If a property is listed as a short sale the bank is looking to obtain current market value for the home. Offering a price well below the market value will not fly.  Be sure to review comparable sales for the town and the area, be aware of the amount that is owed to the bank, and make a compelling offer accordingly.

Most Sales will be “As-Is”

Most lenders will not accept an offer that is pending inspections. I strongly recommend conducting inspections, prior to submitting an offer to the bank, so you are well informed on the condition of the house.

Money Talks

The amount of money you place in escrow after the Purchase and Sale agreement has been signed by the seller indicates to the bank just how committed you are to owning the property. Markets vary, but you should be willing and able to place at least 5% of the offer into escrow.

Other Offers Will Come In

Once the purchase and sales agreement has been signed by the seller, it is submitted to the lender for approval. The lender will receive and review ALL offers on the property, which is why making a compelling offer with all supporting documentation in place is so important. 

There are many things that need to fall into place. But if you have done your homework, properly prepared all the necessary documentation, and have a bit of patience, the process can go smoothly.

For more information regarding the process please visit http://www.realtor.org/topics/short-sales

If you have questions on the short sales process please feel free to email Paula at paula.ostop@raveis.com

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