Buyer Information
What is a Short Sale?
A Short Sale is a real property sales transaction where the seller's mortgage lender agrees to accept a loan payoff of less than what is owed.
Your Real Estate agent may know which properties for sale are short sales by using resources such as multiple listing services and property profiles. If you make an offer on such a property and your offer price is less than what the seller needs to pay off existing loans and other obligations secured by that property, the seller may accept your offer but also require that his or her lender approves the sales transaction.
The seller involved in a short sale may try to convince the existing lender to take a payoff of less than what may be rightfully owed to them. Lenders may not be enthusiastic about this and may carefully evaluate the overall situation.
Steps to Purchasing a Short Sale
Step One:
With the help of your Real Estate agent, make your offer to purchase, negotiate any details and get your offer accepted by the seller.
Buyers involved in a short sale need patience as these transactions may take more time to process compared to other sales transactions.
Be prepared to show that you are pre-approved and therefore qualified to get a new loan on the property, if needed.
Step Two:
Your accepted offer is generally sent from the seller to the lender for consideration. Short Sale Accommodators, Inc. helps the seller and their Real Estate agent forward to the lender documentation of hardship, income, assets, loan amounts and the current market value of the property. Additionally, a short sale lender typically requires a breakdown of the estimated costs to complete the sale transaction, including anticipated sale proceeds if any.
The lender may take several weeks to decide whether a short sale is approved, according to the lender's size, location and staffing.
It may be useful to remember:
- without the lender's approval to reduce the loan amount the seller may not be able to go forward to complete the sale for you.
- lender's are generally not obligated to reduce their loan balance or to make any concessions to the seller or you.
- lender's may choose foreclosure as an alternative process if they can recoup more money than agreeing to a short sale.
Step Three:
Once the lender approves your sales transaction, the escrow time frames begin.
You may want to check with your Real Estate agent to see if the seller submits other offers to the short sale lender that may be better than yours. This may be a difficult situation. You may be the initial buyer with a seller's acceptance of your offer, but the short sale lender may ultimately refuse your short sale transaction and opt for a competing offer that comes in. The lender's rational is to minimize its losses. There also may be tax and other benefits for the seller.
Conclusion:
Although there are obstacles to purchasing a short sale, this type of transaction may also offer an excellent opportunity to find your ideal home at an extraordinary price. Some keys to success are having the time and persistence and a good Real Estate agent to guide you through the process.
Why Lenders Agree to Accept a Short Sale
Lenders have plenty of reasons to accept short sales.
- If the lender takes back the property through a foreclosure sale the lender becomes responsible for property taxes, maintenance, utilities, Homeowner’s Association dues, possible eviction of the previous homeowner and vandalism of the property.
- The time line for the foreclosure process may be another deterrent for lenders as it usually takes a minimum of about 4 months after the homeowner starts missing payments and the lender records a notice of default.
- Even after the lender forecloses the lender may be faced with selling the property in a saturated market and incurring additional costs to sell the property.
With these issues, lenders may give serious consideration to short sale requests involving financially qualified buyers.
|