What to Expect When Buying A Short Sale House

What Should I Expect When I Buy?

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.

The good news 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.

Expect a Longer and More Complex Process

What makes buying a short sale home more complex is that the lender has a rather higher extent of control than the seller themselves. Every offer must be reviewed and approved by the lender, which could take weeks to months.

Which is why in a short sale house, you need a real estate agents who knows how to make this quicker and smoothen things out for you.

Possible Short Sale Hurdles I 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.
   

The Short Sale Buyer's Checklist

• Get pre-qualified 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.
   

Can I Ask the Seller to Make Repairs in a Short Sale?

Short sales are almost always sold “as is.” This means the seller and their bank are not required to make any repairs, even if major issues are discovered during the inspection.

Why still get a home inspection?
Because it helps you understand:

• What problems exist in the home
   
• How much repairs may cost
   
• Whether the deal is still worth it
   

While you may be able to negotiate a lower price based on the inspection results, don’t count on the bank to agree. They’re often already losing money and are unlikely to put more into the deal. That’s why it’s so important to factor in the cost of repairs before moving forward.