Buying A Home - Short Sale Facts You Need To Know Before Buying One

If you've been looking at homes for sale, you've probably come across the term "short sale" for a particular property

. This term describes a situation where a seller, usually in financial problems, is trying to sell his or her home for less than the outstanding balance of the loan. Avoiding foreclosure is usually the motivating factor. In some circumstances a seller may have already defaulted on the loan.

Don't be fooled by the low market price of a home in this situation since they aren't always the best financial deal. The seller could have bought the home at the high point of the cycle and paid more than they should have, or the current real estate market may have forced property values to take a nose dive. As a homebuyer, you also need to be aware of extra costs not included in the properties selling price.

Don't get too excited if a seller accepts your offer immediately. You still need to wait and see if the mortgage lender will approve your offer, notably if they'll be taking a tremendous loss from the sale. The bank must consider the advantages of a short sale versus allowing the property to foreclose.

This process could drag on for several months with no guarantee the lender will take your deal, especially if the property has been listed and marketed at an unreasonably low price far below the outstanding balance.

After evaluating all the possible consequences, you're still prepared to proceed with trying to buy one, make sure you choose a Realtor competent in this area. The first step your agent needs to do is find out how much the seller owes the lender, if it's significantly higher than what you're prepared to pay, the bank won't accept your deal.

Your agent will also need to verify if there's more than one loan. If there is, you'll need the cooperation of each lender in agreeing to accept a payoff for less than the outstanding balance of their particular loan. With more than one lender, it becomes more difficult to negotiate a successful deal as all parties want to receive as much compensation as possible. To research how many lenders there are for a particular property, ask your real estate agent to retrieve the deed on the property.

Another important point is to ask your agent to find out from the seller's agent what legwork has already been completed. Lenders will only consider a short sale situation if a seller is going through difficult financial issues. Although the fact remains a bank has the final approval, you want to verify the seller has tried to contact the bank and confirmed they will accept a short sale. Unless you can afford to wait, you don't want to waste valuable time waiting for bank approval on an offer you're pretty sure will be rejected.

by: Sarah P. Shimanski

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