If you're the buyer in a short sale, protecting yourself is the top priority. Because short sellers are in dire financial straits, there's a good chance the property is in some degree of disrepair. It's worth the $300 to $600 to hire a good, thorough home inspector that you trust. You'll also want to find out if there are any second mortgages, home equity lines of credit or other liens on the property. While it's up to the seller to get approval from all the lenders involved, you want to know what you're getting into. If the seller has to negotiate with any other lenders, it can draw the process out since those banks tend to take a greater hit in the short sale.
The paperwork can be a bit time consuming for you as a buyer: You'll need to fill out and probably have notarized an authorization letter, and you may need to fill out a short sale application from the lender. Being proactive with any paperwork can help save you time and stress.
The other big thing that you can do as a buyer to speed things along is to make sure your financing is in order. This is one area where you might even see things move more quickly if you work with the existing lender. The short sale paperwork includes most of the information they need for a loan, so you might be able to get a fast approval from the existing lender.
Short sales require jumping through a lot more hoops for everyone involved. It's not the ideal situation for the bank or the seller, but it's better in the long term than a foreclosure. For a buyer, the process can be frustrating, but it's worth it if you're getting a good deal on a home.
For more information, check out the links below.
- Adkins, Jana. "The benefits of a short-sale process." The Santa Clarita Valley Signal. Jan. 4, 2011. (Feb. 24, 2011)http://www.the-signal.com/section/24/article/38685/
- Andriotis, AnnaMaria. "Are You Buying Into a Good Neighborhood?" SmartMoney. Dec. 15, 2010. (Feb. 25, 2011)http://www.smartmoney.com/personal-finance/real-estate/are-you-really-buying-into-a-good-neighborhood-1292360513981/
- Armour, Stephanie. "Home sellers frustrated as short-sale deals collapse." USA Today. Aug. 5, 2009. (Feb. 24, 2011)http://www.usatoday.com/money/economy/housing/2009-08-04-short-sales-mortgages_N.htm
- Bank of America. "Selling your home in a short sale." (Feb. 24, 2011)http://homeloanhelp.bankofamerica.com/en/short-sale.html
- Broemmel, Mike. "Short Sale Deficiency Judgment." San Francisco Chronicle. (Feb. 25, 2011)http://homeguides.sfgate.com/short-sale-deficiency-judgment-7220.html
- Dempsey, Bobbi. "10 steps to 'short sale' buying." Bankrate.com. Jan. 12, 2010. (Feb. 25, 2011)http://www.bankrate.com/finance/money-guides/10-crucial-steps-to-short-sale-buying-1.aspx
- Foust, Dean. "The new exit strategy: A short sale." Bloomberg Businessweek. March 5, 2007. (Feb. 24, 2011)http://www.businessweek.com/the_thread/hotproperty/archives/2007/03/the_new_exit_strategy_a_short_sale.html
- MortgageOrb.com. "Survey Finds Short Sales Closings Can Take Up To Nine Months." Feb. 24, 2011. (Feb. 25, 2011)http://www.mortgageorb.com/e107_plugins/content/content.php?content.7899
- National Association of Realtors. "Is Inexperience Hampering the Short Sale Process?" REALTORMag. Jan. 28, 2011. (Feb. 24, 2011)http://www.realtor.org/rmodaily.nsf/pages/News2011012803