How to Buy a Short Sale: The Basics

Are you interested in buying a new home or real estate investment property? The current turmoil in the real estate market offers astute buyers great opportunities to buy real estate at a discount. A record number of homeowners are now at risk of foreclosure or at risk of foreclosure. Foreclosure, however, will destroy a homeowner’s credit. An alternative to foreclosure is a short sale. In a short sale, the owner and the lender agree to sell a property for less than the amount owed on the loan.

If you’re considering buying a short sale, there are a few key points to consider.

• Get a real estate agent: A real estate agent can help you find the perfect property. Choose a licensed real estate agent who has short sales experience. Properties may or may not be listed as short sales. However, short sale listings often state that offers must be approved by the lender.

• get a lawyer: Even if the seller doesn’t have a lawyer, it doesn’t mean you shouldn’t. A short sale may have tax implications as the debt forgiveness may be considered income for the seller. Also, a lender can go after the borrower for the difference between the amount owed and the amount paid. For more information and help finding a real estate attorney, visit RealEstateAttorneyGuide.com
• Check the local market: Your real estate agent should be able to obtain a comparative market analysis. You’ll be able to view active sales, pending sales, and past sales for other similar homes in the area.

• Check public records: Before you make an offer, find out who is on the title, if a foreclosure has been filed, and how much money is owed. Also check if there are multiple lenders involved. Multiple lenders can complicate the approval process.

• Get pre-approved: The lender will want to see that you are pre-approved and have a loan available.

• Give the lender a deadline: Any offer you make must be contingent on the lender’s acceptance. Be sure to give the lender a deadline to accept, after which you can cancel. Most lenders take two to three weeks to make a decision.

• Wait for Commission negotiations: Since the seller does not receive any money from the sale, it is actually the lender who pays the realtor’s commission. The lender will likely negotiate a lower broker’s fee.

• Inspect the Property: Be sure to properly inspect the house. Do not waive your right to carry out inspections and make your offer conditional on their approval.

Buying a short sale can be difficult, but it can also be very rewarding. For more information on buying short sales or foreclosures, visit GreatForeclosureListings.com