- When buying a short sale home, a buyer will need to get approval from the seller and the seller’s lender
- Despite its name, a short sale approval from a lender can take between two weeks and six months
- When buying a short sale home, you’ll benefit from doing your research and hiring a REALTOR® who specializes in distressed properties
A short sale means that the seller has negotiated — or intends to negotiate — to sell their home (and pay off their mortgage) for less than what they owe on their mortgage. In a short sale, you are negotiating with not just the seller but also the lender; even if the seller accepts your offer, the lender may not.
Keep in mind that buying a short sale is different than buying a foreclosed home, where the homebuyer has defaulted on the loan and the lender already owns the property.
If you’re hoping to buy a short sale home in Minnesota or western Wisconsin, here are three quick insights you can use.
Do your homework (and paperwork)
Before you put in a bid on a short sale home, work with your Realtor to learn the home's last purchase price, current tax-assessed value and the recent sales prices of comparable homes nearby. You could also learn whether a foreclosure notice has been filed, how much is owed to the lender and whether there's a second mortgage on the home. Each of these factors could help you determine how much to offer on the home.
Keep in mind that if the property is priced below market value, it's likely there will be multiple offers. In addition to putting in your best and highest offer, make your overall bid as attractive as possible. Include a pre-approval letter from your own lender, nix all contingencies except the inspection, and don't ask for the seller to pay closing costs.
Be prepared for a long wait
Once the seller has accepted your offer, you still have to wait for the “real” approval from the lender. This part of the process can take anywhere from two weeks to six months.
Keep in mind that the lender will accept the best offer, so another buyer could outbid you while you’re waiting on the lender’s approval.
Remember the inspection!
In a short sale, you're agreeing to buy the home "as-is," so it's very important to get an inspection. However, most lenders will not agree to pay for suggested repairs, deferred maintenance or home protection plans. Talk with your Realtor about how to best protect against any issues that come up in your home inspection.
Good homes come to those who wait
Patience is the name of the game when buying a short sale, but if you have a flexible closing timeline, the perks of buying a short sale home can outweigh the disadvantages. Reach out today to talk to a short sale specialist in your area.