The Short-Sale Process: When You Want To Buy A Home Offered For Short Sale
When you find a home that you love, you may be told that it is for sale under a short sale. This means that the property is being sold for less than what the homeowner currently owes on their existing mortgage. Lenders have the final say on the acceptance of the offer, and the process of buying a home under a short sale can take longer than a traditional purchase. The seller is trying to utilize the short-sale process to avoid going into bankruptcy or because they can no longer pay their monthly mortgage.
Why the Lender Has to Approve a Short-Sale Offer
The lender is losing out in a short sale. The lender will get less money than what the home owner owes on the home, and they are therefore responsible for accepting the offer. The lender takes some time in making this decision, as they will investigate whether the borrower truly can't pay the mortgage. They will also take into consideration whether the price they are going to get in the short sale is worth it, or if they will get more by simply going through the foreclosure process instead.
The Benefits of a Short Sale for the Buyer and the Seller
Avoiding a foreclosure is the main benefit of a short sale to home sellers. The process of foreclosure is more stressful, and selling a home this way makes it easier to move on to a living situation that is more affordable. As for the buyer, it's possible to get the home at a bit lower of a price than if you were trying to buy a home being sold traditionally.
The Risks to the Buyer When Purchasing a Short Sale
The biggest risks associated with buying a home through a short sale is the risk of time. It is often harder to establish a closing date because the approval has to come from the lender and not the seller. If you need to move quickly and need a solid move-in date, buying a short sale is not the safest bet. In addition, the property is often purchased as-is, and there's no negotiating power if you find that the home needs extensive repairs.
It's important to work with a realtor when buying a short-sale property. The negotiations can become rather complex, and a realtor will understand the various problems that may come up during the process of purchasing a short-sale home.