Short Sale Home » Short Sale Buyers » Q&A For Buying A Short Sale

1. Why would a buyer consider purchasing a short sale? Think of a short sale as a pre-foreclosure sale and that you are buying from a very motivated seller and negotiating with a motivated lender.  The seller wants to sell to avoid foreclosure and the lender also doesn’t want the property to enter foreclosure, as it is very expensive for the lender.
2. How much can a buyer save by buying a short sale? The savings depends on many factors like the condition of the property, location and the motivation of the lender and seller.  It’s typical that a buyer can normally purchase a property at about 10% below market value.
3. But I’ve heard that buyers can purchase short sales for 50 to 60 percent of value.  Is that true? There are some rare occasions discovered by savvy real estate investors and the properties are rarely exposed to the public.
4. Are there disadvantages to purchasing short sales? A short sale is worth the effort if you do not have a pressing deadline.  The process to buy a short sale involves a lot of time and can take 3 to 4 months on average.  Even when the seller accepts yoru offer, it needs to be approved by the seller’s lender which can take up to 60 to 90 days to receive an answer.
5. Why does a short sale take a long time? 1st the seller must list the property with a Realtor.  2nd, the buyer must be found and a contract executed between the two parties.  3rd, the sale and purchase agreement along with the seller’s financial information is sent to the lender for review (aka short sale package).  4th, the lenders orders a Broker’s Price Opinion (BPO) on the property.  5th, the file is sent to a Loss Mitigation Specialist.  6th, the LMS acepts, rejects, or counters the Buyer’s offer on the property.  7th, the negotiation continues until it either all comes together or falls apart.  8th, if all the parites reach an agreement, the closing date is then set, usually about 3 weeks away.
6. How long does it take to finalize a short sale? Once a purchase and sale agreement is executed, the whole process may take about 3 to 6 months.
7. How is the short sale listing price determined? The list price is determined by the listing agent.  Beware, that some listing agents list the home too low, hoping to create a bidding war.  Low offers are doomed to be rejected by the lender.  Other agents price the home too high and receive no offers before it is too late to save the owner from going into foreclosure.
8. Does this mean that I could offer full price and still not get the property? Yes.  If the listing agent prices the home too low a buyer can easily waste 3 months waiting for a rejection.
9. Who is the Seller, is it the owner or the lender? The seller is the owenr of the property but the lender is involved because the sale is subject to the lenders approval.  The lender must approve the deal since the lender must accept a “short pay” on the mortgage for the deal to work.
10. Who do you submit the offer to? Your offer is submitted to the seller who in turn may accept it, or counter the offer.  The offer is then forwarded to the lender who may accept it, reject it or counter it.
11. Might I be up against other competing offers on the property? More offers could be accepted by the seller as back-ups.  Some lenders will only deal with one offer at a time but they will want to know about all the offers and consider the merits of each one.
12. Must a Buyer need a pre-approval? Sellers usually will only entertain buyers who are pre-approved for financing or who have the cash on-hand.  Most shorted lenders will require the same.  Being simply pre-qualified is not recommended.
13. Could the property possibly be foreclosed upon before the short sale is completed? Yes.  While the seller is going down the short sale path, the lender is proceeding with the foreclosure process with the seller in default.  The foreclosure process can take about 4 months to a year, so it is very likely that a short sale can be accomplished.
14. If the property is foreclosed upon, will I lose my deposit? Your purchase and sale agreement will contain language that requires your deposit to be returned if the sale is not consummated.
15. Can I use a financing contingency with my offer?A financing contingency means that if the lender is not able to provide a financing commitment by a certain date, then you can cancel the contract and receive the deposit back.
16. Must the property be purchased AS-IS? Yes.  The seller’s lender will not allow the seller to credit the buyer for repairs or spend money for repairs.  The buyer may include “as is with right to inspect” addendum, that allows the buyer to cancel the contract if major deficiencies are discovered.
17. What is the inspection time frame? The purchase and sale agreement will cover this but still be aware of it.  Normally, the inspections are conducted within 10 business days of an executed offer.  Although, with a short sale, the buyer should be sure the inspection time frame begins AFTER the lender approves the offer.
18. When purchasing a short sale property, will the Buyer incur any additional expenses? There is no extra expense to the Buyer when purchasing a short sale property.  The buyers costs are negotiated when the buyer’s offer is submitted to the seller and then again if the lender counter’s the offer.

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