how to buy a house listed as a short sale

Before any offer can be considered, we’ll need to receive a completed Second Release letter for any home equity loan, lines of credit or other debts against the property.
In a traditional short sale, you market the property and receive an offer before you contact us.
If you’re concerned that your house may go into and you haven’t qualified for alternatives that would let you keep the property, consider a traditional short sale, where you sell the property for less than you owe.
If you haven’t received an offer yet, please be aware that you’re required to work with a licensed professional to market and sell the property.
If you have a Bank of America home equity loan or line of credit, we’ll take care of completing the required Second Lien Release letter.
A lender might accept a short sale with the property worth less than the balance of the mortgage, if the borrower cannot continue to make the monthly loan payment, does not have enough money to pay back the full balance of loan and needs to move out of the property.
These items provide the lender an idea of the buyer’s capability to purchase the property and the extent of the lender’s loss if it approves the short sale with the buyer’s price offer.
A short sale occurs when a property is sold at a price lower than the amount the homeowner owes on the mortgage, and the homeowner’s mortgage lender(s) agrees to the "short" payoff.
The lender needs to verify that the homeowner cannot continue to pay the mortgage and determine if a short sale is better than foreclosing on the property.
In the case of a short sale, the offer may need to be closer to the market value of the property rather than the list price.
"Approved for short sale" means the bank has already determined that the homeowner qualifies for a short sale and has approved the request to sell the property at a reduced price.
Yes, when a seller is uncooperative and slow to gather/submit the required documentation, this may stall the review process.  This sometimes happens when sellers – who know that a short sale can adversely impact their finances – are reluctant to give up their homes.  They may have very little motivation to cooperate.
Aside from "short sale," some key phrases to look for are "subject to bank approval," "preforeclosure," "third-party review required," and "pre-approved by bank" which may indicate that the property is being sold on a short sale.
If a buyer purchases a short sale property at a price that is lower than what the property is appraised for in today’s market, then the buyer enjoys a discount and picks up some equity.
Plus there is a risk that the homeowner will not qualify for a short sale in which case the property will need to be sold at a higher price.
The seller’s mortgage lender needs to thoroughly review a seller’s short sale request.
Homeowners pursue a short sale when they can no longer pay the mortgage, need to move from the property and want to avoid a foreclosure.
"Third-party review required" means the homeowner has not sought approval yet from his/her lender to do a short sale or approval is pending review of the homeowner’s application.
Making an appropriate and timely offer on an "approved for short sale" listing may be a quicker process because the seller no longer needs to be qualified.
Because of the complex nature of a short sale transaction, it is strongly recommended that buyers work with a real estate professional who has a track record in successful short sales.
If the loan was sold to an investor, such as Freddie Mac or Fannie Mae, the investor will have to approve the short sale.  Investors will have their own requirements and review process before they approve a short sale.
Buyers can use an online database, such as a Multiple Listing Service, or consult real estate professionals who have experience in short sale transactions.
Yes, because in a short sale, the mortgage lender will be receiving less than amount the borrower owes on the mortgage.
Further, the listing price of a short sale may be an amount the seller’s agent thinks the bank might accept – rather than the amount the bank has actually agreed to accept.
However, if the bank hasn’t actually approved the short sale yet at the time of your offer, implementing a deadline will be useless as it may take several months just for the seller to reach a short sale agreement with the lender.
One advantage to both the bank and the seller is that unlike a bank-owned property, a short sale property is less likely to be trashed or ransacked.
For the seller to increase the odds of the bank going through with the short sale, he or she may try to convince you to up your purchase price.
Unlike in a foreclosure, the bank does not own the property in a short sale.
If the seller has not actually gone into default yet, the bank may not be interested in doing a short sale.
However, because the bank must approve the sale (because it is the lender, not the seller, who will be taking a loss on the property) it will seem like the buyer is purchasing the property from the bank.
The bank may also not be interested in a short sale if it thinks it can get more money by going into foreclosure.
It takes a considerable amount of time and convincing to get a bank to agree to a short sale, so if it hasn’t agreed already, don’t waste your time.
If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale.
A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly.
Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.
But if you have the time, patience, and iron will to see it through, a short sale can be a win-win for you and the sellers.
Homeowners often try to accomplish a short sale in order to avoid foreclosure.
In some cases, they may have already been under contract and received an approval but the deal fell though for one reason or another- in that case, they can advertise ‘previously approved’ sale price or short sale but keep in mind that each NEW offer will be reviewed by the lender/asset manager and even if the offer price is the same as the previous approval, there could be additional fees that have incurred since that contract which will change the approval and ultimately, the sale price so, in short, the seller cannot in good faith advertise that a short sale is approved wholly until an approval is received on your offer.
We have since upped our offer a bit so that it gets represented and to offset any advantage that the other offer may have if it’s all cash (We are prequalified and putting a significant amount down.) Our buying agent has basically said there’ nothing she can do to create visability of our offer to the short sale negociator.
Ask your real estate agent if he or she has an addendum for the short sale purchase agreement that allows you to wait until you get the seller’s lender’s approval before you actually have to deposit the earnest money.
We recently looked at a home being sold as a short sale through Bank of America, only to find out that they have turned down nine offers, even offers that were full asking price.
The short sale price is no different than any listed price, you can offer what you want and most people bid lower than asking price.
When purchasing a short sale it’s not enough to find a “buyer’s agent.” It’s more important to find a short sale expert — someone that deals with them on a consistent basis and has a vast network of contacts within the various lender’s offices.
Before you buy short sale home you have to check the Public Records, hire an agent with Short Sale experience, qualify the property and seller for a Short Sale and understand Short Sale commissions and reserve the Right to Conduct Inspections.
This is a common misconception… the term ‘Short Sale’ refers to the purchase price being SHORT of the payoff… it has nothing to do with the process of the sale.
Second, since it now appears that the ‘seller and her agent’ had no authority to offer the house at the ‘short sale’ price, is this fraud? They lied about the ‘Notice of Default’ and misrepresented themselves as being the ‘sellers’, and having authorization, pre-approval, to sell at the listing price.
I have had a short sale house in a Florida country club community under contract since May 2013 Our realtor hired a short sale specialist to handle the transactions with the bank.
When a seller lists a home as a short sale, they are telling you that the list price is short of the actual payoff/amount owed and therefore the final sale price (& terms!) must be approved by their lienholder/s before the home can be sold and title can be transferred.
Short sales are different from foreclosure sales because the lender has not taken the property back, so the owner conducts the sale.
A "short sale" indicates that the sales price of the property is less than the amount the former homeowner owed against it.
In general, short sales do offer some discount from the market value of the property — anywhere between 5 percent to just over 30 percent, according to RealtyTrac’s first-quarter 2010 figures.
You won’t have problems getting title companies to insure a short sale property, which is required to get a mortgage on the home.
At every step, from shopping to negotiating to mortgage financing, short sale properties are just harder to deal with.
This fee goes by names like "short sale administration fee" or "short sale processing fee" and may be about 1 percent of the sales price.
 Most banks will not agree to a short sale in writing until the seller undergoes a lengthy application process and there is at least one formal offer on the table .
A property may be listed as a short sale even before the lender has actually agreed to accept a lower payoff.
All this hassle begs the question: Why bother with short sales? After all, you can probably get bigger discounts buying foreclosed homes or REO properties already on the lenders’ books.
Candace Zansler of Reno, Nevada relates her typical experience purchasing a short sale property: "It was certainly worth the wait, but the waiting — yikes! The hangup was with the banks.
"I have seen them foreclose on properties that had short sale offers on the table," she says.
When the bank agreed to allow the Short Sale, it hired appraisers to provide opinions on the fair market value of the home "as-is." The listing price takes these opinions and comparable neighborhood sales into account, so chances are you’ll have little room to negotiate.
Given the complexities involved with the Short Sale process, you should work with a knowledgeable, experienced ZipRealty Agent who is Short Sale Certified and can guide you through every facet of the Short Sale procedure.
Some banks won’t consider a Short Sale unless the seller and seller’s agent presents the Short Sale package along with a purchase contract from a legitimate buyer.
We’ve put together some helpful information to help you as you work with your ZipRealty Agent on placing a bid, and hopefully purchasing, the Short Sale home of your dreams.
Working with a Short Sale Certified ZipRealty Agent will give you the best opportunity to successfully purchase a Short Sale home with the least amount of hassle.
If the seller of the home on which you’ve made an offer is in the foreclosure process there is always a risk that the home could go to a foreclosure sale before you’ve completed the Short Sale process.
…then read on! We’ve put together a bunch of helpful facts, tips and strategies to assist you in the successful purchase of a Short Sale property.
If you want to make an offer on a home that is a Short Sale, the good deal you’re likely getting comes along with a handful of complexities.
Additionally, please consult an attorney if you have any legal questions about buying a Short Sale property.
The key to buying a short sale is working with real estate professionals who understand the process and have a track record of successfully closed transactions.
Make your offer as free of contingencies as possible, but signing a short sale addendum may pevent the seller from accepting multiple offers during the long waiting period.
Ask your real estate agent to research comparables of similar short sale homes and write a reasonable offer.
Secure your financing, alerting your lender that you’re buying a short sale and that the closing date may have to be pushed back.
Work with a real estate agent who has a track record of successful short sale transactions.
Ascertain that the seller is prepared with his short sale paperwork that must accompany an offer.
If you’re thinking about buying a house that’s listed as a short sale, don’t plan to move soon.
The seller signs the offer, but the lender must agree to the sale after evaluating the seller’s hardship package.
Look at short sale properties with a keen eye as many have been deserted and are missing essential appliances and systems, such as a water heater, air conditioner and even floor molding.
Joan King says she learned “to wait, wait, wait” as she helped her son buy his first home – a three bedroom, two bathroom fixer-upper in Clayton, which was on the market as a short sale.
Ward and her husband had to wait about two and a half months for the bank to accept their offer on the Garner home, even though they offered the full asking price of $205,000.
Real estate attorney Todd Jones has handled numerous short sales and says it’s important to note that the term “short” has nothing to do with time.
    10 Reasons Not to Buy a Short Sale Short Sales Aren’t Always a Bargain for Buyers Short sales happen when home values fall and sellers do not receive enough cash from a buyer to pay off their existing mortgages, providing lenders agree to take less than the amount owed to them.
Bank negotiators will not process a file if the sellers’ short sale package is incomplete, and it’s often the listing agent’s responsibility to get this done right.
What does that mean for you? It means that you could sit in escrow for months – waiting to close on a short sale – while real sales and foreclosures happen all around you, only to find out that you’ve saved nothing for all of your troubles.
Or, a lengthy short sale period can also mean the bank has internal problems, not enough staff or has lost the file a few times, prompting the listing agent to resend the package over and over.
Many times, the listing agent has limited knowledge on the short sale process and can misrepresent their past successes with other sales.
Realize, too, that listing agents might push sellers to list as a short sale, because if the sellers went through foreclosure, the listing agents will not get the listing.
Inexperienced or unethical real estate agents might push a seller into considering a short sale when the seller does not qualify for a short sale.
By the same tolken, we have access to a very limited amount of information regarding where we are in the short sale process from the listing agent.
Remember that many homeowners who become involved in the short sale process are ONLY doing this as a means to stave off foreclosure and buy time to relocate.
A listing agent MUST know what they’re doing for the short sale process to be even remotely successful.
Most of the listing agents we know are hard-working honest people, but we don’t know everyone and we may not know the agent that listed the short sale you’ve fallen in with.
When the seller ultimately discovers that the short sale effect on his credit is close to that of a foreclosure, there is little incentive for him to cooperate with the short sale process.
Lenders accept short sales when the home is worth the short-sale price, which means market value.
Getting a contract to buy the house may have been easier because we didn’t sell our old house, but getting financing wasn’t.
A regular seller would no doubt extend the contract one more day, but not necessarily a bank conducting a short sale.
This house was a good deal, with an asking price of just more than a third of its listing price five years earlier.
Fortunately, their agent didn’t advise them to offer more than the asking price, so the sellers accepted our offer.
Before we made the offer, we sent our real estate agent and a few friends over to check it out.
We were temporarily living in Hawaii, and although I wasn’t shopping for a house, sometimes I browsed the real estate ads back home in Washington state.
I told the new loan officer, "I want that house." She said she’d make it happen.
The seller’s bank extended the closing date but made it clear there would be no further delays.
We broke piggy banks left and right to get the loan amount down to $417,000 so we wouldn’t have to pay jumbo loan rates, and we still couldn’t get the underwriters to budge.
Within 24 hours, we won loan preapproval from a bank and submitted an offer.
My agent suggested I start over with a different loan officer, one with a reputation for moving heaven and earth, if necessary.
Our agent advised us to make an offer greater than the asking price — and get it in fast.
The seller’s bank accepted our offer three weeks later.
Last year, we made an offer, sight unseen, on property more than 2,000 miles from where we lived.
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Long-time reader kyleorton walks us through what he went through to buy his a house listed at $274k via short sale for $229,000, a procedure complicated by Bank of America bureaucracy and a seller’s agent that didn’t feel like doing any work.
Neil assumed even more responsibility here as he pushed through the HUD paperwork at the local title company (until closing, the title company thought Neil was the listing agent as they never heard from Gus and it was the listing agent’s job).
With only weeks until the public auction, Neil was able to contact the seller’s relocation company directly and that same day had a plan in place to pay these amounts outside of closing and bring the closing numbers together.
Neil discussed an option with Gus to make up part of the amount from the seller’s relocation company and Gus said he would ask the seller to pay the judgment outside of closing.
While I’m very grateful to Neil and his hard work, he and I agree that he and most agents don’t have the knowledge or experience to handle a short sale as well as possible.
Ads in the paper and tacked onto telephone poles at intersections scream about the great steals to be had.But what is it actually like to go through this process whereby the bank agrees for the house to be sold at a small loss instead of incurring the sizable fees a full foreclosure would entail? A lot harder than the brightly colored bold letters would have you believe.
Typically, if you’re trying to buy a home in a short sale, you have to sign the purchase agreement with the seller, wait for the bank holding the existing mortgage on the home to approve the purchase agreement, and then you have to go to your lender and start your mortgage process.
Not only does this process take a long time, but when the bank finally approves a short sale, it usually only gives a couple weeks to close the loan.
A lender is unlikely to agree to a short sale unless the seller has no equity and is unable to repay the difference between your sales price and the existing loans.
Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it.
Be aware that the seller need not be in default — to have stopped making mortgage payments — before a lender will consider a short sale.
A short sale means the seller’s lender is accepting a discounted payoff to release an existing mortgage.
A lender may consider a short sale if the seller is current but the value has fallen.
In a short sale, the seller typically receives no money because the lender is losing money.
Once the seller has accepted your offer, the listing agent will it to the lender for approval.

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