{"id":22787,"date":"2021-03-30T11:49:59","date_gmt":"2021-03-30T18:49:59","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=22787"},"modified":"2021-03-30T11:49:59","modified_gmt":"2021-03-30T18:49:59","slug":"buyer-short-sale-for-buyers","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-short-sale-for-buyers\/","title":{"rendered":"13 Short Sale Tips So You Get a Dream Deal, Not a Nightmare Scenario"},"content":{"rendered":"

You may have heard a little bit about short sales<\/a> \u2014 enough to know that this type of real estate listing can present some opportunities to get a good deal. And that\u2019s true! But the potential for upside comes with plenty of caveats buyers need to know about, too.<\/p>\n

Yes, a short sale can be a great chance for a buyer to get a good deal on a home, and that added bang for the buck might allow you to buy more house, or to buy in a better neighborhood than you might get with a traditional home sale in your budget.<\/p>\n

But while short sales offer potential opportunities<\/a>, they come with plenty of potential pitfalls as well. So hunting for this type of home can be tricky business requiring patience, finesse, an experienced real estate agent on your side \u2014 and all the knowledge you can possibly gather to inform the process.<\/p>\n

To help you gain that nuanced know-how, here are 13 expert-backed tips to follow to make sure your short sale-buying experience<\/a> goes as well as possible.<\/p>\n

1. Know if a short sale is the best option for you<\/h2>\n

If you\u2019re considering a distressed home, weigh the option of a short sale against the possibility of buying a foreclosure<\/a> or bank-owned home.<\/p>\n

A short sale happens when the seller owes more on a property than it\u2019s worth, and the lender agrees to sell the home at a loss \u2014\u00a0coming up \u201cshort\u201d on the sale.<\/p>\n

Generally speaking, short sales will be in better condition because they are likely to be occupied given that the homeowner still owns the property.<\/p>\n

These properties may not be fully updated, but they aren\u2019t likely to have some of the problems common among foreclosures that have been sitting vacant (such as vandalism or theft). Correspondingly, short sales will also likely cost a bit more than the other options. And they\u2019ll take longer, too.<\/p>\n

\u201cForeclosed properties go a lot quicker because they’ve already gone through the foreclosure process,\u201d explains Andrew Monaghan<\/a>, a Phoenix<\/a>-based agent with 20 years experience, who has sold 77% more single-family homes than the average agent in the area. Whereas, he notes, short sales are much more entangled.<\/p>\n

2. Know where to find them<\/h2>\n

If you\u2019re searching for a short sale<\/a>, first find a local buyer\u2019s agent who knows both the area and the business of short sales as much as possible. Many brokerages provide lists of short sales for interested buyers, so ask your agent to provide it.<\/p>\n

Short sales are generally available directly through the MLS. You can also find short sales through the newspaper; by posting an ad announcing your search on community bulletin boards or social media; and generally by networking in your community. Some online platforms also have search filters for short sales.<\/p>\n

Do note that in a strong housing market, short sales will be much rarer and harder to find, because it\u2019s far less likely for a homeowner to end up underwater.<\/p>\n

\"An<\/a>
Source: (Zan \/ Unsplash)<\/figcaption><\/figure>\n

3. Read between the lines to understand a listing that interests you<\/h2>\n

Sometimes short sale listings are flagged explicitly as such. If not, some language in the listing might provide clues that they are in fact short sales, such as \u201csubject to bank approval,\u201d \u201cnotice of default,\u201d or \u201cheaded for auction.\u201d<\/p>\n

The city or county clerk\u2019s office has lists of people in loan default, or pre-foreclosure, but note that there\u2019s a period of typically about six months after a homeowner\u2019s last missed mortgage payment<\/a> before the bank will actually foreclose. So these homes may<\/i> become short sales, but it\u2019s not a sure thing, and whether it sells as a short sale or a pre-foreclosure depends on the home value and the loan amount.<\/p>\n

4. Not every agent understands short sales<\/h2>\n

These are specialized listings, and working with an agent who isn\u2019t familiar with short sales can cost you in both time and money.<\/p>\n

The National Association of Realtors<\/a> offers a short sales and foreclosure resource certification<\/a> that distinguishes the experts.<\/p>\n

5. Certain government loans might not work for short sales<\/h2>\n

In general, getting a loan for a short sale<\/a> works much the same way as getting any other home loan. That said, FHA and VA loans require homes to be in certain conditions, which a short sale might not meet.<\/p>\n

One tip: You can try to get preapproved or secure a loan with the seller\u2019s lender in an attempt to expedite the short sale buying process<\/a> and make sure you\u2019re in the clear.<\/p>\n

6. Be ready to deal with a third party<\/h2>\n

The seller may approve your offer<\/a>, but the seller\u2019s lender has to sign off on the deal, too \u2014 which means you\u2019ll need that lender\u2019s approval.<\/p>\n

The lender is aware of the market value of the property, and it won\u2019t sign off on a larger loss than is absolutely necessary. That means you might get a deal on the house, but you aren\u2019t likely to save that<\/i> much money.<\/p>\n

\"An<\/a>
Source: (Jack Ward \/ Unsplash)<\/figcaption><\/figure>\n

7. Get an inspection<\/h2>\n

Short sales are sold in as-is condition, so you aren\u2019t going to get the seller to make repairs. That said, you want to know what you\u2019re getting into even if you can\u2019t ask the seller to fix it \u2014 so definitely get a home inspection<\/a>.<\/p>\n

It\u2019s a good idea to decide in advance what repairs you are and are not willing to inherit, and the inspection will help you determine how much work and expense this home would require if you were to become its owner.<\/p>\n

8. Pay attention to the appraisals<\/h2>\n

The process of buying a short sale involves two appraisals: one when your own lender funds your loan, and another one for the seller\u2019s lender to make sure they\u2019re not losing too much money. If the appraisal for your lender comes in under the home\u2019s offer price, you may need to come up with the additional funds or call it a day and walk away.<\/p>\n

On the other hand, if it comes in high, this is a circumstance where the seller\u2019s lender might ask for more money or perhaps even cancel the deal.<\/p>\n

9. Cultivate your patience<\/h2>\n

As we\u2019ve discussed, you\u2019ll be waiting for a bank to get back to you, which is not simple or fast. Even if the seller approves your offer<\/a> quickly, the lender must approve your offer<\/a> next \u2014 and that can take many months of waiting.<\/p>\n

During that time, the market might strengthen, and that can be good news for your potential equity if the sale finally closes at your offer price. But it can also be an opportunity cost if you lose the house \u2014 or other, better living spaces \u2014 while you wait.<\/p>\n

\"An<\/a>
Source: (Richard Brutyo \/ Unsplash)<\/figcaption><\/figure>\n

10. Lock in your rate<\/h2>\n

Because the timeline for a short sale can be long, you\u2019ll want to remain in close communication with your lender during this time. And ideally, you\u2019ll want to get your interest rate locked in for as long as possible.<\/p>\n

Some lenders will let you lock in your interest rate for up to 90 days. Therefore, if interest rates go up while you wait, you\u2019ll keep your own rate from rising along with it.<\/p>\n

You might also try to arrange a float-down option so that if mortgage rates fall below your locked-in rate, you can get that even better rate when the time comes.<\/p>\n

11. Be ready to pay more in closing costs<\/h2>\n

You might be asked to bring more to the table as the buyer in closing costs than you would ordinarily, and that\u2019s a detail you should factor into your budget.<\/p>\n

Short sale buyers likely have to pay the full buyer closing costs<\/a>, whereas you can often negotiate with the seller to have them cover some closing costs in a traditional sale. Though in a strong seller\u2019s market, sellers have little incentive to cover a buyer\u2019s closing costs.<\/p>\n

The bank probably isn\u2019t going to pay your closing costs because they\u2019re trying to recoup as much on the loan as possible. (However, it might<\/i> if doing so seems to support the interest of avoiding foreclosure.)<\/p>\n

12. Title insurance is important<\/h2>\n

This will protect you from any unknown claims, liens, or heirs in case the title review misses something. It\u2019s especially important for short sales, where there are more unknowns.<\/p>\n

\u201cMaybe there\u2019s a second loan and maybe a third. Maybe there\u2019s a solar lease,\u201d Monaghan explains. \u201cTitle insurance can protect the borrower against a number of things like that.\u201d<\/p>\n

He adds,<\/p>\n

\u201cIt\u2019s extremely important. You want to make sure that any and all liens on the property, or people who have a claim to the title on the property, are satisfied before you close.\u201d<\/p><\/blockquote>\n

13. Have the strength to walk away<\/h2>\n

Short sale purchases are typically long, drawn-out, and complex processes. So buyers should come prepared with major endurance as well as nerves of steel to stay in the game for the long haul. And if it\u2019s not working the way you hoped? That\u2019s OK too: Know when to cut your ties.<\/p>\n

\u201cThere\u2019s just a lot more that can go wrong than people think,\u201d Monaghan says. So manage your expectations \u2014 and be prepared to walk away if that great-sounding deal starts to look like anything but.<\/p>\n

Header Image Source: (Zoran Pucarevic \/ Shutterstock)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

A short sale can be a great chance to get a deal on a home, but short sales come with potential pitfalls, too. We\u2019ve collected tips on short sales for buyers.<\/p>\n","protected":false},"author":150,"featured_media":22790,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","cybocfi_hide_featured_image":"","footnotes":""},"categories":[192,629,635],"tags":[],"class_list":["post-22787","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-for-buyers","category-home-financing","category-auctions-foreclosures"],"acf":[],"yoast_head":"\nThe Short Sale for Buyers Tip Guide: 13 Considerations to Keep in Mind<\/title>\n<meta name=\"description\" content=\"A short sale can be a chance to get a deal on a house, but there are potential pitfalls. 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