Buying a Short Sale Property

Homebuyers looking for a deal will likely come across a short sale property at some point. Short sales are when pre-foreclosure properties are listed at a discount in order to entice a quick buy, because the bank would prefer to take a loss and move it off their books than deal with the burden of having to unload it themselves, or suffer a bigger financial hit by placing it in foreclosure. When you spot a listing price that seems too good to be true, call your agent and find out if it's a short sale. Your agent can check its public records to find out who's in the title, whether there's a foreclosure notice attached to it, and how much the lender is owed.

Short sale complications typically stem from the fact that there are so many parties involved, possibly including junior lien-holders (from a second mortgage), and tax lien holders, all of whom must grant approval through each step. As a result, short sales often take longer to close, sometimes stretching across several months. Delays can arise due to bank holdups (they may not approve the negotiated sale price) or the extra paperwork involved, mostly for the seller, making it difficult to synchronize moving in to your new home with leaving your current one. When you've ironed out the bulk of the details and just want to move in, this is the part of the process that can cause the most frustration.

Short sale properties may also require some fixing up. With the seller in a tough financial spot, the property may not receive the "sprucing up" that typically happens prior to listing a home for sale. Beyond the sexy price tag, these repairs could be expensive and/or time consuming. Use the home inspection report to determine the "true cost" of buying a short sale property ? that is, the sale price plus the estimated cost of repairs.

For a buyer, short sale properties are attractive because of their price tag, but it will require patience and due diligence to acquire one. You'll want to connect with an agent and real estate lawyer who have short sale experience. You know the benefits of having a good agent and lawyer, but short sale transactions present unique challenges. Make sure you partner with professionals who have dealt with them before.