Vermont Short Sale Homes - Buyers - What You Need to Know!

Vermont Short Sales - BUYERS - What You Need To Know!

What is a Short Sale?  A home is being sold below what the current seller owes on the property and the seller does not have other funds to make up the difference at a closing.  Sellers sometimes get in this situation due to number of factors including job losses, aggressive borrowing against their home, declining home values, and personal hardships. 

Short Sale vs. Foreclosure - A short sale is different from a foreclosure.  Foreclosure is when the seller's lender has taken title of 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.  Be prepared for the risks before you pursue a short sale purchase.

You may be a good buyer for a short sale purchase if:

YOU ARE VERY PATIENT.  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.

YOUR FINANCING IS IN ORDER.  Lenders like cash offers.  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 are preapproved, have a large down payment, and can close at any time, your offer will be viewed more favorably.

YOU DON'T HAVE ANY CONTINGENCIES.  If you have a home to sell first, or you need to be in a new home by a certain time, a short sale may not be for you.  Lenders like no-contingency offers and flexible closing terms.

If you decide to purchase a short sale property, you will need expert assistance including:

EXPERIENCED REAL ESTATE ATTORNEY.  A good real estate attorney who is knowledgeable about the short sale process will increase your chances of getting an approved contract.  Only about 2 of 5 short sales are approved by lenders.  Special provisions and language written into a purchase contract is essential throughout the negotiation.

QUALIFIED REAL ESTATE PROFESSIONAL.  A qualified real estate professional will be able to show you short sale homes, help negotiate the purchase when you find a property, and smooth communications with the listing agent and lender.  In Vermont, it is not always obvious a property may be in a short sale status.

Some of the other risks faces by buyers of short-sale properties include:

POTENTIAL FOR REJECTION.  Lenders want to minimize their losses.  If you make an offer tremendously lower than the fair market value, chances are your offer will be rejected.  Or the lender could make a counteroffer, which will further lengthen the process.

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.  Vermont is a Recourse State so the borrower can be liable for the deficiency.

NO REPAIRS OR REPAIR CREDITS.  You will most likely be asked to take the property "as is."  Lenders are already taking a loss on the property and may not agree to requests for repair credits.

To Sum It Up - the risks of a short sale are considerable.  But if you have the Time, Patience, Flexibility, and Iron Will to see it through, a short sale can be a win-win for You and the Sellers.

Most of the information above is from the National Association of Realtors which I am a member of.  I have added some Vermont Specific Information.  Also, I am currently working on the NAR Short Sales and Foreclosure Certification a/k/a SFR.  I hope to write about Short Sales as an option for Sellers but am still trying to understand the "Making Homes Affordable" Rules and Guidelines and how they apply in Vermont.