What You Should Know About Buying a Short Sale

In today's real estate market, short sales are very common. Simply put, a short sale is when a homeowner owes more on a property than the home's current market value. In today's market, many homes are worth less than their mortgage. When these homeowners fall behind on payments, or must sell the home because they are forced to move, the bank may agree to take a lesser amount than is actually owned, to prevent the home from going into foreclosure.

Short sales can be good for all the parties involved. However, as a buyer there are a few things you should know before you begin the short sale process.

1. Many approvals may be required. If the homeowner has a second mortgage on the home, the second lender must also approve the short sale. In addition, if the homeowner has mortgage insurance, the insurance company will also need to approve the short sale. With so many approvals required, short sales sometimes take a long time, and sometimes fall through.
2. You may not be able to get repairs done. Because the bank is taking a loss on the house, they may not be willing to perform any needed repairs. You may have to agree to buy the house "as is".
3. The process is lengthy. The short sale process is not for every buyer, because it can take months to complete. You can make an offer and not hear back from the homeowner and their lender for months. And,  many real estate agencies won't allow you pending offers on more than one home at a time. So, this process is not for the family who needs to get into a new home fast.
4. You have to be ready. Banks may make you wait for months, but when they finally approve your short sale offer, they'll expect you to be ready to close in a hurry. It's a good idea to have your loan preapproved before you ever make an offer, so that you can move quickly if your offer is approved. In some circumstances, the lender will require this preapproval before you even place your offer.
5. The seller has to jump through hoops, too. Sellers may have to do a lot of convincing to get their lenders to agree to a short sale. They usually have to demonstrate financial hardship. The lender will likely require that they prepare a "hardship package" which is a set of documentation that demonstrates the fact that they cannot afford their current home. Though the hardship package is not your responsibility, it's a good idea to ask if the seller has prepared one for the lender, so that you can have a good idea of how long the approval process will take.

With these five pieces of information, and a good real estate representative such as the SearchHomesOrlando Team, you should be prepared to make an offer on a short sale home if you desire. Just remember that you have to be flexible and patient to make most short sale purchases work.