What's the typical process when buying a short sale?

Asked by Trulia, San Francisco, CA Mon Mar 5, 2012

How long does it take? What are some pitfalls?

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Tony Lewis’ answer
Tony Lewis, Agent, Valencia, CA
Mon Mar 5, 2012
The most important issues and concerns with buying or making an offer begin prior to making tthe offer. It is essential that you are working with a Realtor that knows the process and has great relationships with the Realtor that has the listing. There is so much work & detail involved that you need to know that the home owner is motivated and qualified to sell as a short sale. You also need to find out whether the listing agent is certified as a short sale specialist and has the much needed knowledge and experience to be successful in this type of sale. It is also crucial that your Realtor knows how to write an offer that allows you to not lose money should you not complete the transaction. Details and knowledge is key to dealing with a short sale and should never be undertaken without a specialist in this field. Call, text or email any time to learn more about the process. You can find an incredible deal under the right conditions! Tony Lewis RE/MAX of Valencia CDPE Cetified Distress Property Expert
Web Reference:  http://www.TonyLewis.com
3 votes
Crystal Shep…, Agent, Santa Clarita, CA
Mon Mar 5, 2012
There really isn't a typical process. It's different with every transaction, so it's vital to sit down with a short sale specialist to discuss how a short sale should work.

There are some very important questions to ask:

1. How many loans are on the property?
2. Are the loans backed by FNMA or Freddie, or are they treasury loans?
3. Are any of the subordinate liens HELOCs?
4. Is there an HOA? If so, are the dues in arrears?
5. Is the short sale approved?
6. Which banks are involved?
7. Has the short sale process already been initiated with the lien holders?

These are just a few of the questions to ask BEFORE submitting an offer on a property. The answers will help you to determine if the short sale is a viable transaction.

Short sales can often be obtained for less than market value, which is fantastic, but buyers frequently find themselves responsible for payment of past HOA dues, portions of property liens and various legal fees in order to close escrow. The wait for an approval can be as little as a few weeks, or as long as several months. In virtually every case, the property is sold as-is with no repairs offered.

The bottom line: you need to know exactly what you're getting into when you make an offer on a short sale, and you have to be patient. If you have an experienced short sale agent on your team, he/she will review the perks and pitfalls with you, and manage your expectations before you ever step foot into a short sale listing. Buying your dream home doesn't have to be a nightmare!
2 votes
Felicia Grady, Agent, Santa Clarita, CA
Mon Mar 5, 2012
A short sale will take months to complete. In some instances, the time period can be shorter, and in other instances, can be significantly longer...and some short sales are not completed at all. Briefly, some of the pitfalls include: lienholder(s) not approving the short sale; or there may be approval by lienholder(s) but not at the listing price or at the price the buyer expected; or there may be approval but the seller or buyer may not agree to the terms, such as having the buyer contribute money toward the release of a second lien, including back-owed HOA dues; or if the house is in default, it could be foreclosed on before a short sale can be consummated. This is not a complete list of pitfalls. If you want to pursue a short sale, be sure that the Realtor you are working with knows enough about short sales to be able to ask the right questions of the listing agent, and ask your Realtor whether the listing agent, too, knows the short sale process, in order for you to have the best chance of being able to buy that short sale property. For more information, please see the Short Sale Q & A on my website which will explain a bit more about the pros and cons of buying a short sale.
2 votes
Crystal Shep…, Agent, Santa Clarita, CA
Mon Mar 5, 2012
Almost forgot!

8. Find out right away if a notice of default has been filed.
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