By: G. M. Filisko
Published: March 19, 2010
By preparing for a real estate short sale, you can emerge with a great home at a favorable price.
A real estate agent experienced in short sales can identify which homes are being offered as short sales, help you determine a purchase price, and advise you on what to include in your offer to make the lender view it favorably. Ask agents how many buyers they've represented in short sales and, of those, how many successfully closed the transaction.
Ask agents to recommend real estate attorneys knowledgeable in short
sales and title experts. A title officer can do a title search to
identify all the liens attached to a property youâ€™re interested in.
Because each lienholder must consent to a short sale, a property with
multiple liens, like first and second mortgages, mechanicâ€™s and
condominium liens, or homeowners association liens, will be harder to
A title search may cost $250 to $300 up front, but it can help weed out less desirable properties requiring multiple approvals.
By agreeing to a short sale, lenders are consenting to lose money on the loan they made to the sellers to purchase the home. Their goal is to keep those losses as low as possible. If your offer is dramatically less than the homeâ€™s fair market value, it may be rejected. Your agent can help you identify the price thatâ€™s good for you. The lender will determine whether approval is in its best interest.
There are two stages to a short sale. First, the sellers must consent
to your purchase offer. Then they must submit it to their lender, along
with documentation to convince the lender to agree to the sale.
The lender approval process can take weeks or months, even longer if the lender counteroffers. Expect bigger delays if several lienholders are involved; each can make a counteroffer or reject your offer.
Lenders will weigh your ability to close the transaction. If you're preapproved for a mortgage, have a large downpayment, and can close at any time, theyâ€™ll consider your offer stronger than that of a buyer whose financing is less secure.
If you must sell your current home before you can close on the
short-sale property, or you need to close by a firm deadline, your offer
may present too many moving parts for a lender to approve it.
Also, consider ordering an inspection so youâ€™re fully informed about the home. Keep in mind that lenders are unlikely to approve an offer seeking repairs or credits for such work. Youâ€™ll probably have to purchase the home â€œas is,â€ which means in its present condition.
This article includes general information about tax laws and consequences, but isn't intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.
G.M. Filisko is an attorney and award-winning writer who luckily has avoided the need for a short sale on her properties. A frequent contributor to many national publications including Bankrate.com, REALTORÂ® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.