A short sale is a home that is on the market, likely at a discount. It’s a way for the seller to avoid a foreclosure, and for buyers to find a bargain. When you make an offer on a home that is listed as a short sale, it is important to understand that the lender of record must approve the sale price. A homeowner under financial distress that owes more for a mortgage than the home is worth might consider a short sale.
Getting Your Short Sale Mortgage
Buying a short sale is all about timing. You will want to have pre-approval for a mortgage before you make an offer so that you know exactly what you can afford. It takes longer to purchase a home through a short sale than it does to purchase one traditionally. As the buyer, get your finances in order and be prepared to wait as the deal goes through.
Understanding the Short Sale
It will help to work with a mortgage lender that understands the short sale process. Both the seller and the lender are losing out financially, and it takes some negotiation with the lender for most deals to go through. The buyer doesn’t have to do anything different when buying a short sale, but usually needs to wait longer for the house closing to go through. A seller that is underwater on their mortgage and wants to avoid a foreclosure is a good candidate to sell their home in a short sale.
Find a Good Real Estate Agent
When you are looking for a home that is offered in a short sale, your real estate agent is essential to the process. Find a real estate agent that you feel comfortable working with, and who can explain the short sale process to you. It is important to uncover if there are any lienholders on the property you want to purchase, and uncover how much the seller owes the mortgage company for the property.
Get the Home Inspected
By purchasing a home through a short sale, you are buying the home “as-is”. It is vital to get a thorough inspection done on the home so that you know what you are getting into. A home listed for short sale is often in better condition than one in foreclosure, but an inspection is the only way to know about any problems. Once you make an offer on a short sale, you don’t get to negotiate a lower price if the inspection goes poorly. The seller is supposed to let you know if there are any issues with the home, but this may not be the case.
Lienholders and the Closing Process
If there are lienholders involved with the property, the closing process takes longer. Each lienholder will need to release their hold in order for the sale of the home to go through. Although the lender may accept the sale price, an analysis must be done to make sure the home is worth less than the seller owes on the home. In addition, the seller must show that they are in financial hardship, including proof of income, assets and tax forms. The closing process takes longer than a traditional closing to ensure that all lien holders are taken care of and the property can be cleanly transferred to you, the new owner.
At Mid-America Mortgage, we work with all types of buyers, including those interested in purchasing a home offered for short sale. Learn more about the short sale process and how we can provide you with the mortgage services you need. Contact us today at 573-875-1100 and see what your options are.
