Buying A Short Sale Home – What You Need To Know

Are you considering buying a short sale home? What is a short sale? A short sale occurs when the seller of a property owes more on the home than what it is worth, a situation often referred to as being upside down. In order to sell a home as a short sale, the bank has to approve the sale, agreeing to lose money on the deal.

A short sale differs from a bank owned home in that a bank owned home is completely owned by the bank. In a short sale, the owners of the home simply owe more than what the home is worth and cannot pay off their mortgage completely if they decide to sell. Homes sold as short sales are often in better condition than bank owned homes.

Short sales can be a good bargain, but they can also test your patience, and there is no guarantee you will even get the home in the end. Short sales are sold, “as-is”. The seller and the bank will not fix anything on the home.

If you find a home you would like to buy that is a short sale, start by being organized and prepared. Have your Realtor help you write up your offer. If you are able to pay cash, you may have an edge because the bank won’t need to worry about your financing. A good pre-approval letter is a must, if you will be getting a mortgage. The amount of earnest money you put down is also important.

Once the seller accepts your offer, they pass it on to the bank. The bank will go over the file for an average of 60 – 90 days to determine if the short sale will be approved or not. They may come back with a counter offer, they may accept your offer, or they may decline your offer when their review is finished.

The seller may also cancel the sale if the bank requires them to contribute to closing costs or pay back a second mortgage they have on the home. This typically happens towards the end of the months of negotiation.

If your offer is accepted by the bank, they normally give buyers about a month to wrap up their financing and close on the home. Buyers cannot negotiate with the bank. Whatever the bank decides is the final word – take it or leave it.

Homes in short sale situations are hard to find right now. Buying a short sale home is not for someone who doesn’t have time to wait, or for those who can’t live with the bank turning down their offer after months of waiting. If you are up for the challenge, a short sale home may be a perfect deal for you!

 

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