What every Buyer needs to know about Short Sales - #8

Bad terms - Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you.

What every Buyer needs to know about Short Sales - #7

What is acceptable in an offer to purchase, and what is unacceptable (Part 2) - Be prepared to pay your own closing costs. The Lender is already taking a loss on the property and may view your request for prepaid costs as a sign that you can’t afford to purchase the property. You will also most likely be asked to take the property “as is.” Again, this is due to the Lender’s loss on the property. They will likely not agree to requests for repairs or repair credits, and the current owner will likely not have the means to pay for repairs.

What every Buyer needs to know about Short Sales - #6

What is acceptable in an offer to purchase, and what is unacceptable (Part 1) - Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms.

What every Buyer needs to know about Short Sales - #5

Pre-qualify, pre-qualify and pre-qualify again – You will need to submit proof of loan qualification not only at contract inception, but every 30 days thereafter. Pre-qualification letters are only good for 30 days, and you will need to continually reassure the Short Sale Lender that your qualification status has not changed. You may also need to pre-qualify with the Selling Lender prior to their accepting your offer. During that time, DO NOT FINANCE ANY MAJOR PURCHASES such as cars, furniture or appliances. Check with your lender to see how this process will affect your interest rate.

What every Buyer needs to know about Short Sales - #4

Be sure your financing is in order - Lenders like cash offers. But even if you can’t pay all cash for a short-sale property, it’s important to show you are well qualified and your financing is set. If you’re preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably than that of a buyer who’s financing is less secure. FHA is the least desirable financing option when making an offer on a Short Sale

What every Buyer needs to know about Short Sales - #3

Be patient – The short sale process from initial offer to close typically takes 4-6 months. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer for the lenders to approve the sale.

What every Buyer needs to know about Short Sales - #2

What is the difference between a short sale and a foreclosure? - A foreclosure occurs when the seller’s lender has taken title to the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale holds many potential pitfalls for buyers. Know the risks before you pursue a short-sale purchase.