You will often come across the term "short sale" when searching for a home in many markets today. You'll find that, in some cases, these can be the best deals on the market.
Buying a short sale property is a different process from buying a home the traditional way. It's not only about you and the seller ... the seller's lender or lenders are involved in the process, as well, and nothing gets done unless the lenders give their blessings.
Foreclosures are bad for the homeowners and expensive for the lenders, so they might opt to accept less than the mortgaged amount to allow the property to sell. The buyer gets a good buy, the seller avoids the foreclosure, and the lender gets some money back and stays out of the expensive foreclosure process.
1. Be Patient. The process of getting bank approval takes, on average, 4-6 weeks before getting an answer from the seller's lenders on whether they will accept the offer. There's no use being angry about that or fighting that ... that's just the way it is. If you're not willing to wait that long, or longer, you're better off going after another purchase.
2. Ask the seller's agent how she is handling the short sale process. Not every process is being handled the same. The seller's agent is required by law to present all offers to the seller. Remember, though, that the seller is the seller, not the lender. Some listing agents are sending all offers to the lender, while others are sending the highest and best offer, and holding any other offers as backup.
3. Limit contingencies. The seller's lenders won't usually balk at "as is with right to inspect" and financing contingencies, from my experience, but you're hurting your chances of getting the home if you load a contract with contingencies.
4. Limit buyer closing cost concessions, or at least be specific. Some lenders won't pay buyer closing costs. Others will ... if you ask for them the right way. If you need to ask for buyer closing costs, ask for a specific dollar figure, not "the seller shall pay half the lender fees and the property insurance." The lender is looking at a bottom line, and requests like that can't be processed.
5. Look for a deal, not a steal. The short sales are often discounted below market value already. Low-balling the low-ball is often a waste of everyone's time. The lender will only discount off of market value a certain amount, or else it's in the lender's interest to foreclose. If you lowball the lowball on a home you really want, you won't get the home, and the seller might be many steps closer to foreclosure once the process plays out to no one's benefit.
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