Things to Know Before You Buy a Short Sale

What is a short sale? A short sale means selling the house for less than what is owed on it. 

Short sales can be a long drawn out, frustrating process for both buyer and seller. Keep in mind that just because a home is listed as a short sale sometimes does not mean it can be bought. The lender must approve the short sale price and this can take weeks or months with no guarantees. 

Before you pursue purchasing a short sale, pick up the phone and call your real estate agent. Have your agent research the short sale property first. 

Get educated about the market and pricing of comparable homes. Just because a short sale is advertised at a price that looks to be a steal doesn't mean it is. Short sales that are priced "cheap" often attract multiple offers, so it is important that you are familiar with what a fair offer price is. Sometimes that price is more than what the property is listed at.

Have your agent research how many loans there are on the property and how much is owed. Chances are, an offer that is significantly lower than what is owed won't see the light of day when sent to the bank for consideration.

Find out if the listing agent has any experience working with short sales and whether or not they have the completed short sale package from the seller. If the answer to either is no, chance are the short sale will be an incredibly frustrating process with unlikely success. 

What is a short sale package? It is the information that is sent to the bank to convince them to consider allowing the property owner to do a short sale. At a minimum, the seller should submit a letter of hardship describing why they are unable to pay for the home, W2s, payroll stubs, tax returns, bank statements and all financial information such as monthly bills. If it is a hardship situation due to divorce or medical concerns, that information should also be provided. The seller must submit a short sale request in writing to the lender either before or after the property is listed. If there is more than one loan on the property, the seller must submit a short sale request to all of the lenders. The seller also needs to have a third party authorization that allows his/her agent to talk to the bank.

Have your agent find out how many offers are on the property. If there are multiple offers, chances are some of the offers are above asking price. If you aren't willing to pay more, it's is probably not worth your time to offer.

Be patient. If you are in a situation that you want to buy a house now, a short sale is not for you. The short sale process can be a long road and you need to decide up front if you are commited to see the process through. Keep in mind, you may wait weeks or months only to find out the bank will not approve the short sale.

SHORT SALE AGENTS - IF YOU HAVE ANY INFORMATION THAT YOU WANT TO ADD, PLEASE FEEL FREE TO COMMENT.