The input from my colleagues below is right on target. I would add that many buyers mis-perceive that buying a Short Sale property is the same opportunity as an REO (bank-owned/foreclosure) property and nothing could be further from reality.
Dealing direct with a lender who has repossed the property can offer a few advantages:
1. The seller-in-distress issues are removed from the equation and thus streamlines the transaction timeline.
2. Banks may be willing to accept a price lower than what the loss-mitigation department would have considered acceptable during the short sale stage. This is because they are guided by the property's appraisal and generally look to the lowest rung on the ladder of fair market value.
Finally, if you do write an offer on a short sale property, make sure your agent writes in a Subsequent Offer clause that would prevent the seller and lender from accepting an offer (presumably with a higher purchase price) after your offer was accepted and escrow opened. This measure reduces your risk of wasted dollars on appraisals (required by your lender) and the physical inspection. If the lender is unwilling to accept this condition, you might be better off looking for another opportunity.
Coldwell Banker Brentwood
Sara Mehrpouyan CDPE
Specializing in Foreclosure & Short Sale
Buying a short sale can be stressful for some homebuyers without knowing what it involves. Therefore, it is even more important to understand what short sales are and its process, so you have some expectation going in. Finding an agent who knows how to structure your offer for a short sale is critical to the success of getting your offer accepted. It can take as long as 12 months to get an approval from the bank and close a transaction. Although, many lenders said they are improving their short sale process, the fastest short sale I have ever done still took 2.5 months from submitting an offer to closing. You can read more about the process on buying a short sale on my blog: http://helenchong.wordpress.com/2010/06/04/what-is-the-proce
Hope this helps and I will be more than happy to answer any more questions you may have regarding short sale.
Let me know what you would like to do.
All the best,
Prudential California Realty - Santa Monica