Buying A Short Sale
As a buyer watching the real estate market, you are undoubtedly aware that there are more "short sale" properties on the market, at least in many areas. A short sale is a home where the market value of the property is LESS than the loan amount owed to one or more lenders. Note that there may be state or regional differences in the requirements and paperwork - ask your agent.
Don't be scared off by these properties as they may turn out to be a great deal for you. But you need to know a few things:
- A seller must disclose if the home either IS a short sale or likely will be due to the market value.
- A short sale MUST be approved by the lender. Even though a seller might accept your offer, it will be subject to approval by the lender
- Lender will (likely) send out an appraiser to evaluate the property in light of recent sales
- Lender must receive hardship letter and other required documents from the seller in order to approve a short sale
- Lender will likely have a checklist of requirements and paperwork required for the short sale process
- Lender will likely request that the sale be "as is" and due to hardship will probably not approve any credit for repairs
- Be prepared for a short sale to take more time (total time may be 60 days +/-)
If you are making an offer:
- Make sure you make the offer contingent on the short sale being approved by the lender and set a time frame for approval
- An addendum form is advised to outline the short sale contingency terms and conditions (this is a optional state form here, but there may be other requirements elsewhere in
Californiaand in other states)
- A letter to the seller is also advised requesting written confirmation that the lender has received the hardship letter and other documents as part of the short sale application
- There is a good chance there will be more than 1 offer
- It is still prudent to conduct a home inspection even though the lender will probably require an "as is" sale
- It is possible the seller will not be able to do any Section 1 repairs resulting from the Wood Destroying Pest Inspection (e.g., termites) due to hardship of funds
Be sure to discuss issues and questions with your agent before proceeding, preferably someone who has some experience with short sales.