Buyers looking to score a great real estate deal often consider purchasing a short sale--a property that sells for less than the balance owed on its mortgage. There are many different types of short sale properties, from upside down homes to vacant land. While purchasing a short sale can be financially beneficial to the buyer, it can also be good for the seller and lender, as it keeps the property from facing foreclosure.
"If you think purchasing a short sale property may be right for you, seek an agent specializing in short sales, as the process is often more complex than a traditional real estate transaction," says Lawrence Finn, CEO Owner/Broker of Coach Real Estate Associates.
There are some extra steps that buyers need to take when entering into a short sale, which can require doing some additional homework and assembling the right paperwork--this is why having a short sale specialist on your team is crucial.
You need to assemble an arduous proposal that includes a specific short sale request application, an authorization letter, the purchase and sale contract, a statement of the property's value, a detailing of the costs and liabilities, and a settlement statement, which can be prepared by your agent.
According to Finn, paperwork aside, many short sales involve a series of extensions and can often take longer than other real estate sales. This may not be a big deal if you're an investment buyer, are purchasing a second home, or have a relaxed move schedule. However, if you're relocating for work or otherwise facing a time crunch, a short sale purchase may not be the smartest move.
One of the biggest headaches that comes along with short sales can come from the bank. "Keep in mind that just because a property is listed with short sale terms, and the seller accepts your offer, this doesn't necessarily mean the lender will accept," Finn warns. This can create extra stress and extend the time until closing.
Your agent, if acting as buyer representative, can help with the research by finding out who is in title of the home, whether a foreclosure notice has been filed and how much is owed to the lender. This information is vital when deciding how much to offer on the home.