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10 Things to Know About Buying a ‘Short Sale’

June 15, 2009

1. When there is a property offered for sale as a ‘short sale’ the seller’s lender is being asked to take less money than what is owed. The lender is going to be deciding how much they will accept and what expenses they will pay for.
2. All terms of the agreement of sale between the buyer and the seller, as well as the listing contract between the seller and the broker are subject to change by the seller’s lender.
3. A short sale offers the buyer a great opportunity to buy a home at a very favorable price. On the other hand, the lender is not going to accept a ridiculously low offer. It is a good idea to look at recent comparable sales data before deciding on an offering price.
4. The seller’s lender will not allow any funds to be allocated to doing repairs to the property. While the buyer may have a home inspection, the property is selling ‘as is.’
5. The lenders prefer cash offers, but may take an offer with a mortgage contingency in some cases. The buyer’s offer must include proof of funds to close and/or or a mortgage pre-approval from an acceptable lender.
6. The buyer’s offer must include a ‘Short Sale Addendum’ which can be supplied by the listing broker.
7. The buyer’s offer will be submitted to the seller’s lender and other lien holders as part of a package. The package will include the seller’s financial information, an estimate of what the lender can expect to net from the purchase, and information regarding the present condition of the property, together with the buyer’s offer.
8. The seller’s lender will order a Broker Price Opinion and an Appraisal to compare with the buyer’s offer before they will make a decision as to whether they will accept, reject, or counter the offer.
9. Buyers should anticipate a 120 day settlement time. Although some lenders move much more rapidly, buyers who need a quick settlement should not consider buying a short sale property. The time that it takes for the seller’s lender to make a decision depends upon how busy they are, how many people they have working in their ‘short sale’ department, and how complicated the case is.
10. Buyers can take advantage of any programs such as the 1st time home buyer $8000 tax credit.

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