Buying a House on Short Sale

Buying a House on Short Sale

Buying homes on short sale can be very stressful, but can end up saving you a lot of money…
WealthHow Staff
In our economy today, there are all sorts of methods to buy and sell houses. With foreclosure rates going up to historical highs, many homeowners have turned to short sales to get rid of houses they can no longer afford or do not want anymore. While short sales can negatively affect the credit rating of those selling the house, it can be a great way for those looking to buy a house to save some money and buy the house of their dreams.
What is a Short Sale?
A short sale is a sale of a home that involves both the bank and the seller. In a foreclosure, the bank owns the property and the owners are out of the picture. In a short sale, however, the owners are trying to sell the house for less than they owe to the bank on their remaining mortgage. This does not always mean that the sale price is at or below market levels, but that is often the case. Either way, with a short sale, the owners have stopped paying on the mortgage or are rapidly approaching that point, so the bank is often willing to accept the short sale rather than be forced to foreclose on the sellers. This can create a great buying opportunity for buyers who are prepared and patient.
What Do Buyers Need to Do?
Sometimes, short sales can create a hostile situation where the owners of the house do not want to leave, but are being forced to leave. If this is the case, potential buyers might find the house in disarray, but this is not typical. Be it an amicable or hostile situation, buyers need to be sure a few things are in order before they make an offer. If you are looking into buying a short sale home, you should make sure that it is approved by the bank. This means that the bank has approved the price of the home to sell for less than is owed on the mortgage. If this isn’t done before an offer is made, there can be some miscommunication with regard to the price of the home. Buyers should also be sure to be pre-approved for a loan that is worth at least the amount they want to offer on the house. This can show the banks that you are serious about purchasing the home, rather than just making an offer to see how far you can get. You should also have the required amount you’d like to put down and then some for closing costs in a savings account.
Tips and Tricks
Once you put an offer on the house, you may be asked if you want to close in 30, 60, or 90 days. You should always choose 30 days in this case, even if you will not be ready to close in 30 days. This tells the bank you are serious and will get the paperwork moving faster than otherwise, and does not necessarily mean you will close in 30 days. Banks are very busy, and it can take a very long time for a short sale to go through. If you select a long period of time for your closing date, the bank will probably let it sit there for a long time before responding to your offer. After this, patience is key. It may be called a short sale, but there usually isn’t anything "short" about it.