Buying a Short Sale 6 Steps to Make Sure it Really is a Good Deal
By Barbara Pronin, RISMedia Columnist
When you see a home listed for less than the neighborhood warrants, it may be a short sale. That is, the lender is agreeing to accept a discounted loan payoff from a seller in default instead of foreclosing. But short sales are never easy, and may take many months to complete. Before you jump in to make an offer, consider the following steps:
1. Do your research. Check the public records to be sure who is on title, whether a foreclosure notice has been filed, and how much is owed to the lender. That may help you arrive at a reasonable offer.
2. Hire an agent with short sale experience. An experienced agent working on your behalf will save time and hassles in negotiating with both the seller and the lender. If the seller accepts your offer, your agent will send it to the lender with proof that you have been preapproved for a loan and a copy of your earnest money deposit. (The lender may ask you to increase it.) Your agent should also include a copy of comparable recent sales in the neighborhood to verify that the price you have offered is fair.
3. Give the lender a deadline. Make your offer contingent upon the lender's acceptance. If you do not give the lender a time frame, after which you will withdraw your offer, the lender is under no pressure to move forward.
4. Expect commission negotiations. Since lenders lose money on a short sale, and they will be paying the agent's commission, they will likely want to negotiate the commission amount with the listing broker, who will share it with the agent.
5. Reserve the right to do inspections. Most lenders will not pay for items the seller normally covers such as home protection plans, termite inspections, etc. The buyer will likely be asked to purchase the home "as is" so it is very important that you pay for and get a reliable home inspection before purchasing.
6. Expect delays. Many lenders do not have enough staff to handle short sales requests in a timely manner. Also, they will likely make certain demands on the seller, which may take months to be met. In all, say agents, purchasing a short sale comes with its own set of frustrations. But if you are willing to be patient and persistent, you can make a really good deal.
Reprintedwith permission from RISMedia. ©2013. All rights reserved.