How to Buy a Short Sale Home

Buying a Short Sale

Short Sale = Long Purchasing Process

If you’re considering buying a short sale, expect the entire process to take up to a year from the time you submit an offer to when you actually take possession of the home. Although it’s possible for a short sale to close in as little as a few weeks, it’s important to be realistic about the timeline.

Unlike a conventional home buying process which involves negotiations between the buyers’ agent and the home sellers, with a short sale the lender has the final say in whether or not an offer to purchase is accepted.

Making an Offer on a Short Sale Home

As a homebuyer, once you’ve viewed a short sale home you’d like to purchase your agent will need to write up the offer to purchase which will be presented to the mortgage lender. This offer must include a comprehensive list of comparable sales, as the lender will want to be sure the home sells for a price that’s close to market value.

Remember, the lender will be losing money on the transaction and they want to minimize their losses. Banks only agree to sell the home as a short sale if they believe they’ll recoup more money than they would through the foreclosure process.

Once your agent has submitted your offer package to the bank, it can take up to 30 days for the bank to acknowledge receipt. A negotiator is assigned within the next 30 days, and in some cases, a second negotiator may be added to the file. The bank usually requests a broker price option, or BPO, which is a simplified appraisal completed by a real estate broker who works for the bank.

If the BPO price is similar to your offer, the bank may ask all parties – you, your agent, the listing agent and the homeowner – to sign an affidavit swearing that there is no pre-existing relationship or collusion involved in the transaction.

At this point, the lender will issue a document approving the short sale, and the purchase can be finalized.

Pros and Cons of Buying a Short Sale House

There’s a number of pros and cons to consider when buying short sale. On one hand, you could secure a great home in a desirable neighborhood for a bargain price, and it’s a less-risky process than purchasing a foreclosure.

On the flipside, short sales can take weeks or even months to complete, which means you’re left in limbo waiting for the lender to process your offer. The price may not be worth the hassle, especially if the homeowner has been unable to take care of the property and major repairs are needed.

Above all else, buying a short sale home requires help from a real estate agent who understands all aspects of the process including how a short sale works for the seller and the homebuyer.

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