is it difficult to buy a home that is a short sale,or a forclosure?

Asked by Deepak, Deshpande Wed Jan 21, 2009

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Pacita Dimac…, Agent, Oakland, CA
Fri Feb 20, 2009

On a short sale --- find out if the property has more than one loan on it, and if they're by different lenders. It is doubly hard to get approval for the short sale of this property when that is the case. It is a little easier when the loans are with the same lender.

If you find a similar property that is a foreclosure (REO or real estate owned), and if it's priced aggressively, you may encounter a multiple offer situation. The best and highest offer will win.

So the degree of difficulty depends on your willingness to wait on a short sale, the terms of your offer on an REO.

Good luck!
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Willy Byer, , Hayward, CA
Fri Feb 20, 2009
I've been in contract for a short sale since September...
The offer I made was for just under what I considered to be fair market value.
In the months that have passed, the value of the home has dropped by at least $50K.
I am now in the process of renegotiating the sale price and this will probably take several more months and probably kill the deal.

I am not an inexperienced first time buyer. And, I've been dealing with an agency that has experience and skill in short sales.

The only reason I'm posting this is to advise anyone that is considering buying a short sale.

If an agent tells you a short sale is an easy way to get a good deal, you better look for another advisor.
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Lisa Cartola…, Agent, Oakland, CA
Wed Jan 21, 2009
Hi Deepak,

A short sale and a fHi Deepak,

A short sale and a foreclosure can be very different.

In a short sale the owner of the property is trying to sell the property for less than their current mortgage. For example if the owner of a property has a mortgage on a property for $600,000 and they are trying to sell the property for $450,000. The owner of the property of the property may be current with their mortgage payments and taxes and may be selling the house because they are relocating out of area or for a variety of other reasons. In a short sale the owner is involved in the process, but does not have the final say. Because the property is being sold for less than the mortgage the bank holding the mortgage will be the one to ultimately make the final decision regarding accepting an offer or not. There will be occasions where there are two separate banks involved if there are two separate loans on the property. (for example there is a first mortgage with Lender X and a line of credit with Lender Y). Once an offer for a property is received, the offer will go to the lender for a decision. Once the lender gives the green light, the potential buyer for the property can proceed as in a typical escrow. The process from submitting an offer to receiving the green light from the lender can be a very lengthy process. I am currently working with a buyer and we submitted an offer on a short sale in the beginning of October and we just heard back yesterday (middle of January) that the lender approved the short sale! So this can try the patience of many buyers.

Foreclosed properties are properties that are owned by the bank. The owners of these properties were not able to make their mortgage payments and eventually went through the foreclosure process by witch the bank repossesses the property. The bank will then hire an asset management company that will in turn hire a Realtor to sell the property. These properties, referred as REO’s (Real Estate Owned) are often in a wide array of condition. As you might imagine the previous owner of the property who was not able to make mortgage payments properly was not able to address deferred maintenance issues. Or if the owner was in the process of making upgrades to the property, they will stop in mid-remodel. Of they will take everything they can on their way out the door. With these properties the bank owns the asset and often times the time frame for sale are much less than short sales. These properties are typically sold in their as is condition and the banks do expect buyers to be able to perform within a defined time period.

There are occasions where you will see a blending the of two scenarios. If an owner is having trouble making payments they may try to sell the property before it goes to foreclosure. These scenarios are not impossible, but extremely difficult.

When looking at a property to purchase it is first a good idea to evaluate what you are looking for in a home in terms of size, age, location. In addition you will want to make sure you talk to a lender to discuss different loan options so you find a mortgage with a payment that is comfortable for you.

If you have any other questions regarding short sales or foreclosures, you can email me at

Hope this helps!

Take care,

Lisa Cartolano
Alain Pinel Realtors
oreclosure can be very different.

In a short sale the owner of the property is trying to sell the property for less than thier current mortgage.
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Jane Becker, Agent, Worcester, MA
Wed Jan 21, 2009
buying a shortsale or forclosure is neither more difficult or easy than buying a none distressed property, especially if you are working with an agent who knows what they are doing. Look for the following initials behind their name and you will be assured that at least they have educated themselves on this process: CDPE, LMC. Very few agents put the work in to learn how to do it right. Consider working with someone who takes the time to make sure that he/she knows how to protect the client, you. The biggest difference between a distressed property and a traditional listing is you no longer working with a person but with a burocrosy (sp). The seller is emotionally invested in the home and might be offended by a low offer. The bank just wants to get the most for the house. The seller can make decision quickly, while the bank might have to climb a ladder of hierarchy. Once you have the go ahead, the bank wants you to hurry up and extensions can be challenging. The seller might or might not be flexible on time line changes. Some times the bank has its' own set of rules. For example, I have a buyer looking to buy a Wells Fargo foreclosure and this institution requires a pre-approval with them, talk about a fox in the hen house, but what are you going to do. I can't wait for an attorney to get hold of this extortion rackett. Anyway, the process is slightly different, develop patience and nerves of steel and best of luck. Please feel free to get in touch with me if you have any specific questions.
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, ,
Wed Jan 21, 2009
Let me add to what Carl mentioned about FHA financing. It's only a problem if trying to close the new FHA loan within 90 days of bank takeover. after 90 days FHA financing is permissible.
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The Medford…, Agent, Fremont, CA
Wed Jan 21, 2009

Foreclosures are easy, unless:

(1) You are trying to buy in the price range where multiple offers are the order of the day AND
(2) You are using FHA financing to buy.

REO banks do not like dealing with FHA loan programs and will gladly accept a decent offer from anyone else before they accept an FHA based purchased agreement. FHA may require repairs, etc. that the banks are not willing to do and so on.

Not nice to hear, but true.

As for short sales, you need:

The patience of Job, the tenacity of crazy glue and the willingness to be subjected to mental torment as things drag on and on and on and on. If you need to move within 60 days, don’t even think about it.

Like any other type of purchase, there are some potentially great deals out there in Short Sales. IT TOTALLY DEPENDS ON WHERE YOU ARE BUYING. In many cases, the banks take so long that prices fall below your offered amount. We’ve seen this consistently in various Bay Area locales. With this in mind, we’ve developed a short sale strategy that we now use that is very effective for protecting buyers and ensuring the best possible deal and outcome.
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Pacita Dimac…, Agent, Oakland, CA
Wed Jan 21, 2009

TIming, pricing, location, patience, experience.

These all play a part in how easy/difficult it would be.

SHORT SALE: Typically, it can take 45 days from the time an offer is accepted by the seller, before a loss mitigator responds to the contract. The short sale lender can accept, reject, or counter. HOWEVER....if the process was already in place by the time you submitted an offer, or if it was previously in contract but the buyer backed out for one reason or another, the bulk of the work is done. So if you submit an offer and it's within the parameters of what the short sale lender says they will need to net after the sale, your chances are multiplied.

Two of my short sale listings sold quickly --- in less than 30 days ---- to the second buyers who submitted offers after the first buyers backed out. The buyers and their agents were ecstatic. I was able to provide the agents guidance on how much they can write (oops, too low....) to make their offers stronger.


If the REO agent priced a listing low
If buyers' agents know it
if the property is in a favorable loaction, and
if the buyer's agent is informed about the market conditions should have adequate guidance on how to write an offer.

Try to be reasonable and try to write an offer close to fair market value. By doing so, your chances increase.

Don't assume that just because a property is an REO, that you can write an offer for 50% below! Not all REO properties are priced correctly. Some REO agents deliberately price it low to stoke interest and induce multiple offers.

Your best bet: find a realtor who understands and knows how to do a short sale and an REO. You'll be better off in the long run.

Good luck!
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CJ Brasiel, Agent, San Jose, CA
Wed Jan 21, 2009
Deepak -

Some are , some are not. It very much depends on the lender, the home, and the agents involved on a short sale. It takes patience on the buyer's side and a good knowledge of the value to feel good about the deal. For REO s it takes an eye for potential repairs and knowing the value before making an offer.

On the agent side; the agent should be easy to work with and NOT a bully. Dealing with loss mitagators and asset managers, and assistants galore, takes a nice person who is tedious, diligent, and experienced. Each deal is different and it takes flexibility to find the solution in each case. I am happy to talk about case scenarios I have experienced. No obligation to use me as your agent or to purchase a home.

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blaison samu…, Agent, Santa Clara, CA
Wed Jan 21, 2009
Hi Deepak,

It's not difficult to buy a short sale but you need to have some patience because it takes more time than the regular houses. The good side is you may get a good deal than the regular sale. The other part is you need an experienced agent representing on your side who knows how to deal with short sale.

If you need need any assistance in buying, please let me know, I can help you to get a good deal and explain more about short sale. I have experience in short sale and also certified in short sale.

Blaison Samuel
Certified Short Sale Expert

Prudential California Realty
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Steven Ornel…, Agent, Fremont, CA
Wed Jan 21, 2009
Not if you use someone who has done it many times before. Short Sales will take longer than REOs, typically 60-120 days, you normally hear back on REOs in about a week. Both are worth the wait!

I have plenty of experience with these. Of course, I would be pleased to help you in your search, if desired. Please review my Trulia Profile for professional/academic achievements and Client Testimonials. All I need is search criteria and I'll get started.

I’m not sure whether you have been formally Pre-Approved. As far as buying, this is your first step (not a pre-qualification, see:. for the difference between the two) so you can be ready to act when you need to, or be aware of any issues that may prevent you from buying when you want to.
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, ,
Wed Jan 21, 2009
It's not difficult if you have a proper team in place. Be sure to hire an agent with experience with these transactions.

Do you have your financing in place? Most agent will ask you to have this in order before writing an offer.

I would be happy to speak with you regarding the financing aspect and pitfalls.

Hope to talk with you soon.
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