Investment

Short Sale Buyer Tips

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A short sale occurs when a homeowner is unable to continue making payments on the mortgage and sells the house for less than the balance on the loan. Although buying a property through a short sale is an ideal way to find a good bargain, short-sale properties are not for everyone. You need to be aware of the factors involved before deciding if a short-sale purchase is for you.

Be Patient
After you submit an offer to the seller, the lender will need to approve the offer before you can proceed with the transaction. The approval process generally takes about two months. If multiple lenders are associated with the mortgage, it can take more than four months. However, if the lender makes a counteroffer, the approval process can extend even longer.

Have Your Finances in Order
Show the current lender that you’re serious about purchasing the property and have a secured financing plan. If you cannot pay cash for the property, make sure that you’re preapproved so that you’re ready to close as soon as the lender approves your offer. A large down payment will also increase the chances of a favorable decision.

Contingency-Free Offers
If possible, avoid contingencies, such as needing to move in by a specific date. Lenders prefer contingency-free offers.

Get Qualified Help
Look for an professional real estate agent with short-sale experience. Don’t be afraid to ask a prospective agent how may short sales he has closed successfully. A qualified real estate agent knows what to look for when identifying short-sale properties and can help you negotiate the price.

According to Realtor.com, lenders approve less than half of short-sale offers. A real estate attorney who’s experienced in the short-sale process can help you get your contract approved. You particularly need a real estate attorney if your contract requires specialized terminology.

A title officer can help you identify any liens attached to the property. It is more difficult to close a short-sale transaction when multiple lien holders are associated with the property.

Know the Risks
Until you actually close the transaction, a number of factors could change the outcome of the deal. For instance, the lender could change the terms of the contract that you’ve already negotiated with the seller. The lender may reject your offer if it’s too low. The lender might also make a counteroffer, which may be higher than you’re willing to pay. In some states, the lender may require that the homeowner sign a promissory note for the remaining balance on the loan.

If you are a seller who needs to achieve a quick sale, read this article for some practical tips: 5 Tips to Sell a House Fast.