Credit Infocenter

Buying a Short Sale Property

February 8th, 2011 · 1 Comment · Real Estate

by Kristy Welsh

(Last Updated On: April 5, 2011)

If you’re not in a hurry to move, and are content to wait patiently while the seller negotiates terms with their lender, you can buy a great house through a short sale. While the owner may have paid $500,000 for it at the height of the real estate boom five years back, you can buy that same house at today’s much lower market value. Patience is the name of the game here, a game that can move at a glacial pace at times.

With two important exceptions, the deal is otherwise the same as buying any other house.

  1. Short sales are purchased As-Is. (The seller is suffering financial hardship, remember, so don’t expect any repairs.) Should your home inspection uncover things that do need repair, you have two choices:
    • Complete the sale and do the repairs yourself once it’s yours;
    • Back out of the deal and get your earnest money back.

    Your contract should always say that the sale is contingent upon an inspection period and you should check everything out thoroughly in the timeframe allotted.

  2. While most real estate contracts require only two parties to agree to the terms of sale—the buyer and the seller—short sales are contingent upon the seller’s bank agreeing to the terms as well. This is where the waiting comes in. And this is what requires unending patience.

There’s one more aspect of purchasing a short sale that may make you crazy. There can be a long, long wait between the time the seller accepts your offer and the time their lien holder (bank) agrees to accept the sale for less than they are owed by the seller, but as soon as the bank agrees to the sale they want you to Jump! (Often, bank agreements give you 21 days to close.)

If you think you have the inner fortitude required to get through a short sale purchase, you can get a great house at a great price. While there isn’t anything truly typical about short sales, in general, it goes like this:

  • You make an offer, “as is,” contingent upon financing, and inspections, and appraisals.
  • The seller accepts your offer, which is a legal contract to purchase, but a short sale addendum states that you also need bank agreement.
  • You wait, patiently, for that bank agreement to arrive. Depending on how far along the process is when you make your offer, the wait could be as much as a year or as little as a month. Three to six months is more the norm.
  • Once the seller receives bank agreement, and is okay with the terms of it, the clock starts ticking for you.
  • Deposit your earnest money.
  • Get your lender anything he needs to finalize your financing (mortgage).
  • Do your due diligence: home inspection, termite inspection, septic, CCRs from the homeowner association, etc. Check out everything that is important to you during your inspection period.
  • Title will send you a HUD settlement statement.
  • Sign your documents. Once the docs are recorded, the home is yours.

Be aware that there is always the possibility that the seller’s bank might not agree to the short sale terms. A good Realtor can help you identify short sales likely to close. And the best Realtor will also keep you posted on a regular basis about what’s happening (or not happening) so you know your house is still in your future. Again, patience is key.

Tags: ·······

One Comment so far ↓

  • Jennifer Lopez

    There are some downsides to selling a home without a real estate agent. Another reason is that buyers realize you don’t have an agent and can try to do some hard negotiating with you and drive your price below market level because you are already “saving money” from not paying a commission and they think they should benefit from those savings as well.

Leave a Comment