You might have run into short sale listings in the past, but passed on them. Believe it or not, these listings can help you secure your dream home at a huge discount. However, buying a short sale can turn into a nightmare if you don’t know what you’re getting into.
Consulting with a real estate agent is the best way to cover your bases when buying these properties. Before you contact an expert or search for potential short sales, it’s important to learn the basics about pre-foreclosure homes.
Here are the seven most common questions buyers ask before pulling the trigger on a short sale.
1. What Is the Difference Between a Short Sale and Foreclosure?
The main difference between a short sale and foreclosure is the party with whom you negotiate. In the former, the homeowner starts the home selling process, but the lender approves and reviews all conditions and offers. On the other hand, the bank owns a foreclosed property because the homeowner defaulted on their loan.
2. Is It a Good Idea to Buy a Short Sale House?
Buying a short sale property might take time, but it’s a great option for some home buyers. Lower prices and less competition make these pre-foreclosed properties ideal for a home buyer looking for a bargain.
However, lenders may charge a short sale administration or processing fee of about 1% of the sales price. Before making an offer, it’s important to keep in mind that it may take up to 120 days to close on a short sale.
3. How Does a Short Sale Work for a Buyer?
Short sales work differently to a typical listing on both ends of the transaction. After a home buyer finds a pre-foreclosure listing, it’s time to check out the property and submit a short sale proposal depending on the lender.
Typically, buyers submit their application, mortgage pre-approval, proof of income, an earnest money deposit, and a signed purchase contract. After submitting your proposal, the lender will deny, accept, or counter your offer. A real estate agent can help you gather all the needed documents and negotiate with the lender to get your offer approved.
4. What Is Short Selling a Home?
Short selling a home is when a homeowner sells their property for less than what they owe. It’s used as a foreclosure and bankruptcy prevention measure. While it’s a complex process, lenders may accept lowball offers from short sales when homeowners are too behind on their payments and the current home market value is less than the mortgage balance.
5. How Can You Find Potential Short Sales?
You can find short sale properties online on Zillow, Trulia, and other realtor websites. An experienced realtor can also help you find the best pre-foreclosed home for your situation.
You should consult with an agent experienced in closing short sales. Their background can help you close your short sale sooner and get a better deal.
6. What Should You Do Before Closing on a Short Sale?
Before closing on a short sale, buyers should conduct a title search on the property. It’s important to make sure no other creditor or party has a claim to the home. The seller or real estate agent may disclose the liens on the property but verify this information.
7. How Can You Place an Offer on a Short Sale House?
You may place an offer on a short sale by yourself. However, work with a real estate agent to get the best results.
A realtor can find out details about the listing that aren’t easily accessible, so you can make the best offer. If you do it by yourself, you must contact the primary home lender to learn their application process.
Some lenders ask you to fill and submit their special own forms for a short sale offer. If they don’t have one, you’ll ask them to explain the paperwork and requirements needed to consider a short sale offer.
When a property has more than one loan, it’s important to consider the second loan since that lender needs to agree to the sale. Typically, buyers won’t pay the second lender’s full balance, but they will receive an amount for their cooperation.
Closing on a pre-foreclosed property can turn into a long and complicated experience without help from an experienced agent. We recommend you don’t try to buy a short sale listing on your own. Working with a local real estate expert will ensure a smooth transaction.
An agent will also guide you through the process including recommending any due diligence tasks such as home inspections, title searches, and more. When you work with a Clever Partner Agent, you work with a top-performing realtor who will help you secure the best short sale listing at the best price.
Contact Clever today to connect with a great real estate agent who will guide you throughout your short sale buying process to get the best outcome.