Short sales often look like other listings in the MLS, except they may have a lower asking price than comparable properties.
The term "short sale" is a bit of a misnomer, though, as this type of transaction can take much longer to complete than a standard home sale.
The buying process is similar to a standard purchase. You still apply for financing the same way, and order inspections the same way, for instance. But complications in the selling process aren't uncommon, and you'll need patience and a solid real estate agent to deal with them.
The good news, though, is that times have changed. Many banks have streamlined their processes for short sales, making it much simpler and less time consuming for buyers and sellers. Market data shows that the time it takes to close a short sale has steadily decreased over the past few years.
Why you need an experienced agent
For many reasons, choosing a real estate agent who has experience with short sales makes a tremendous difference. An experienced agent may already have the right contacts within the lender's local office, and most likely has already helped buyers through the process.
Possible short sale hurdles an agent can help you navigate:
Second mortgages: These can pose problems because a second lender may not agree to the terms set between the primary lender and the seller.
Mortgage insurance: If the seller has mortgage insurance on their loan, the mortgage insurance company will need to approve the short sale.
Other liens on the property: A lien is a claim by an outside person or company on a property for money owed. Liens pose hurdles whether the transaction is a short sale or not, and will have to be addressed before the property can be transferred to a new owner.
Government-backed loans: If the home seller's loan was a government-backed loan, such as an FHA loan, this can cause delays and hurdles because the government will need to be involved in approvals.
HOAs: HOAs can present complications because the lender might not pay fees associated with the HOA transfer from the seller to the new owner. Your real estate agent can help put a plan in place for paying HOA transfer fees, document costs and any unpaid dues.
Mortgage insurance: If the seller has mortgage insurance on their loan, the mortgage insurance company will need to approve the short sale.
Other liens on the property: A lien is a claim by an outside person or company on a property for money owed. Liens pose hurdles whether the transaction is a short sale or not, and will have to be addressed before the property can be transferred to a new owner.
Government-backed loans: If the home seller's loan was a government-backed loan, such as an FHA loan, this can cause delays and hurdles because the government will need to be involved in approvals.
HOAs: HOAs can present complications because the lender might not pay fees associated with the HOA transfer from the seller to the new owner. Your real estate agent can help put a plan in place for paying HOA transfer fees, document costs and any unpaid dues.
Working with an agent who understands the short sale process saves you stress and time spent dealing with obstacles that often come up along the way.
Tips for choosing a top-notch agent
Using an agent is important in any real estate transaction, and even more so in a short sale. A skilled agent will be able to prepare for obstacles and move through them as quickly as possible.
When choosing an agent, it's important to:
1. Look for training and education specific to short sales, such as Certified Distressed Property Expert (CDPE), Short Sales & Foreclosure Resource (SFR) or Five Star credentials.
2. Look for experience helping buyers purchase short sales in your area
2. Look for experience helping buyers purchase short sales in your area
It's equally important to be comfortable with your agent and use all the same tips noted in the Tips on Choosing and Working with a Realtor.
Ultimately, your agent can mean the difference between a successful short sale and a huge, frustrating disappointment.
The Short Sale Buyer's Checklist
Hire an agent with experience closing short sales.
Get prequalified for a mortgage.
Get a home inspection, but understand that most lenders will sell only "as is." The inspection can help you decide whether the short sale price is reasonable, given the cost of repairs needed.
Understand who is paying the agent's commission and whether you have to make up any differences to your agent.
Submit documentation to the lender.
Have plenty of patience, but balance it with persistence. Keep in mind that banks have grown much better at processing short sales, which is good news for you.
Get prequalified for a mortgage.
Get a home inspection, but understand that most lenders will sell only "as is." The inspection can help you decide whether the short sale price is reasonable, given the cost of repairs needed.
Understand who is paying the agent's commission and whether you have to make up any differences to your agent.
Submit documentation to the lender.
Have plenty of patience, but balance it with persistence. Keep in mind that banks have grown much better at processing short sales, which is good news for you.
