Buying a short sale? Here’s what to expect…
If you follow the real estate market, you have undoubtedly noticed the words “short sale” appearing on more and more listings. Short sales occur when a seller owes more on his mortgage than he can sell his home for in a given real estate market. In order to sell the home without owing the balance of the mortgage out of pocket, the seller’s lender must agree to accept less than the full mortgage amount for the home. Lenders are willing to participate in short sales because sellers asking for a short sale are usually under financial stress. The chances are good that if he can’t sell, a seller might not continue to pay the mortgage and the home will go to foreclosure. While short sales often represent a good opportunity to get a lot of home for your money, they are not easy. Both the buyer and the seller need to have A LOT of patience. If you are a buyer thinking about a short sale, below is a typical short sale scenario.
After listing his home for sale at a price that will cover the costs of his mortgage, a seller’s property languishes on the market. Realizing that his home is priced too high, the seller and his real estate agent determine that in order to sell the home, the price must be lowered. The seller contacts his lender and asks if they will consider a short sale. The lender agrees to consider it and issues a package of forms to be completed and submitted when the seller gets a short sale offer. These forms will paint the seller’s complete financial picture and help the lender determine that short sale price is not drastically below market value. The seller lowers the listing price and the short sale process has begun.
A buyer comes along, falls in love with the house, and makes an offer. The two parties negotiate the sales price . When they have an agreement, the offer is submitted (along with the package of forms that the seller and his real estate agent have completed) to the lender. If the seller has a second mortgage or mortgage insurance, the short sale has to be approved by not just the primary lender but also the second lenders and/or the mortgage insurer. This can literally take months, and until the lender approves the short sale and issues a letter of seller conditions that the seller agrees to, there is no certainty that the seller will be able to sell. For the buyer, it is reasonable to be hesitant in investing money in home inspections, appraisals and other costs associated with the purchase of a home. Why spend money without knowing whether or not the lender will approve the sale or if the seller will be able to meet the short sale conditions put forth by the bank? The seller sees things a bit differently. In his view, he is committing to the buyer by taking his home off the market. He is likely to feel that the buyer should do the inspections and work to secure financing so that the transaction may be completed as soon as possible after the approval. When the inspections are done is ultimately up to the buyer and seller to determine in their particular situation.
When the seller’s lender has approved the short sale amount and negotiated any additional terms with the seller, and the buyer has completed his inspections and financing, the sale can proceed. As long as both parties have been prepared for this lengthy process, the end can be very sweet. Short sales do work out, and the process is becoming more streamlined as time goes on.
If you are looking for a good buy and feel you have the stomach for a short sale, check out this 2 bedroom, 1 bath condo on the 
Linderhof golf course in Glen. Offered furnished at $119,900, this is a great Glen location near skiing, Storyland and the White Mountain National Forest. Give Linda Pinkham a call here at Pinkham Real Estate (800-322-6921) for more information.