short sale advice

SmrBrd2012 · October 2013

Anyone ever buy short sale property? Or specifically choose NOT to for a certain reason? Pros? Cons? Also, it says they require short sale preapproval. Is this any different from regular mortgage preapproval? Thanks, all!

musictchr25 · October 2013

A short sale is when the seller can no longer afford their property and is looking to sell it. Because they are upside-down on their mortgage, the bank will determine what they will accept as the sale offer because they will likely end up losing money on the deal.

Like a non-short sale purchase, you will need to be pre-approved for a mortgage by a bank or a lender. If you make an offer on a short sale, and the seller accepts the offer, the bank may not. This is where the short sale pre-approval comes into play. This is something that the sellers will have to initiate with their mortgage broker, which will inform them of the lowest amount of money that the bank will accept for the purchase of the home.

Short sales usually take a minimum of three months from the time of an accepted offer by the seller because the bank will need time to evaluate whether or not they need more money to cover the mortgage remaining on the home.

So, in short, here are my pros and cons:

Pros - Can typically get a house at a much lower price than market value

Cons - The process can take as little as three months to as long as a year from the day of the signed Purchase and Sales Agreement. The homes are often in rough shape and are not well taken care of. Once your inspection results are returned, you typically can not negotiate for repairs to be done by the seller - only the state mandated items will need to be done, ie: mold and radon.

Janessadawn · October 2013

A couple of things to add: unlike a traditional sale where the seller has a limited time to respond to an offer, the bank does not. In short sale situations, the seller can accept the offer but the seller's bank can take weeks or months to respond if they want to. Even if you get the seller and their bank to accept your offer, it can take a long time to complete the process.

Also, sometimes people list their homes in "short sale" status but where they haven't even gotten approval from their bank to do a short sale. We looked at one such home and I'm still really confused as to how a seller can list it as a short sale before it's been bank approved, but apparently they can. So if you make an offer on a short sale before it's been bank approved, prepare to wait even longer.

Our REA was very reluctant to show us any SS houses and only did so when I was insistent. My mom tried to purchase a home this way right after the market collapsed when it was a true buyer's market, but after waiting a couple of months for the bank to respond she finally walked and ended up finding a better place. When we first met our REA back in early Sept he showed us an earnest money check he's had from one of his buyers for the purchase of a short sale. She wrote the check in June of 2012 (not a typo, 16 months ago) and is still waiting for the sale to go through. Which isn't to scare you away from looking at SS homes, but you have to know what you're getting into if you do want to go that route.

MrsAshleyH10 · October 2013

We bought a short sale. The family living there had not paid their mortgage in 6 months. We put an offer in at the beginning of March with a standard 60-day close. The bank came back accepting our offer only if we closed by the end of that March, about 2-3 weeks time. Luckily for us we were able to work with our landlord to get a new tenant in and our mortgage people were fantastic and worked quickly.

However, the sellers did steal the $2k refrigerator they said they were going to leave-- which we didn't know until we did the final walk through the night before closing..... The sellers told their real estate agent that they didn't care if they got foreclosed on and they weren't' going to return the fridge. Also, they left a bunch of stuff in the house which we ended up throwing out, donating to Good Will, or using.

Overall, we got a decent deal on the house and were happy with how everything went (besides the fridge thing). I would probably do it again.

Jokerkat12 · October 2013

If you're serious about purchasing a short sale double check your short sale amendment.

I've seen it happen where you as the buyer are waiting so long for the bank to approve the sale that the prices have gone up enough to pull the home out of short sale and the seller cancels the sale, leaving the buyer priced out of the new market.

Here, the short sale amendment says if the bank hasn't approved the short sale within 90 days the contract can be cancelled. I always try to extend that to at least 180 days, just in case.

Good luck!

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