A short sale — an alternative to foreclosure — can be a good buying opportunity, but if you choose to pursue this method of transaction, you may have to jump through a few hoops and dodge a few red flags. Here are some bullet points to help you better understand the process.
- A short sale is an alternative to foreclosure for the property owner who cannot continue to make payments and is unable to sell through an ordinary method because the current market value is less than what will be owed by the seller at closing of the property.
- Not all banks will cooperate with short sales, and those that do will require an actual, pre-approved, non-contingent buyer who has signed a purchase offer for the property.
- The short sale approval process will always require a property appraisal to determine current value. However, in many cases it makes sense for the bank to actually take less than what is owed because they can then avoid a costly foreclosure proceeding that will include attorney fees, current and back taxes, water and sewer bills, and more.
For those buying property through a short sale, there are a few things to keep in mind:
- It’s imperative that you put a time limit on your purchase offer that clearly state that your offer is subject to approval of the short sale NO LATER THAN (insert date). One month is a reasonable time period. A bank’s short sale department will deal with transactions that have deadlines first.
- Be very stingy about your deposit amount as long delays can occur that can tie up your money indefinitely. Your deposit can be has low as a couple hundred dollars.
- Plan for a home inspection as banks usually will not entertain an offer without one. It is an absolute must to have the property looked at by a professional, for your own protection.
If you have have questions about the often complicated short sale, please do not hesitate to contact our office.