Real Estate TipsHow to buy a short sale

What is a short sale?

A short sale occurs when someone sells their home for less than they owe

on their mortgage(s). The lender has to approve the sale.

Why would a lender agree to this? If the owner has suffered a financial

hardship and cannot make his mortgage payments, the lender may want

to accept a lower payoff. Foreclosure is expensive for lenders. Legal fees,

maintenance expenses and depreciation all cost the lender money.

Benefit of Buying a Short Sale

A buyer can score a great deal on a

property if they have patience.

Pitfalls of Buying a Short Sale

The short sale process may take more time than a traditional retail sale to

complete and it may be difficult to pin down a firm closing date until the

seller's mortgage lender(s) agrees to the short sale.

Junior-lien holders such as second mortgages, HELOC lenders and other

special assessment liens may also need to approve the short sale.

If you need to move within a short time, a short sale may not be for you. If

you need to sell your existing home in order to buy another home, a short sale

may not be for you.

Remember, you and your agent have no control over the approval process.

And after many months of waiting to hear, the bank may just deny approval.

When is a short sale a good idea?

If you absolutely love the home.

If it priced below market.

f you have the time and patience to wait for approval.

If the repair items don’t bother you.

Then it makes sense to make an offer.

Where can you find a short sale?

Glad you asked! I created a search page just for my clients

that lists every short sale available in Rhode Island. If you

live elsewhere, just contact me and I can put you in touch

with an expert in your area. Here is the link to my page:

http://www.johnasellsri.com/short-sales-for-sale-in-ri/

(You will need to login to view the properties.)

How to buy a short sale

Once you have decided on a home, it’s time to put in an offer. Your offer should be competitive. It should be based on the condition of the property and the market value. The property’s market value can easily be gauged by looking at comparable homes that have sold in the area recently. In today's improving market, short sale prices have risen dramatically.

A good real estate agent will provide the best advice about how to negotiate a reasonable sales price.

Should you totally low-ball it? Probably not. Remember, it takes time to hear back. It’s not like making an offer on a tradition sale. The bank may sit on your offer for 6 months, then come back with a denial .

It’s not a good idea to waste your time with unrealistic offers. The seller's mortgage lender will check property values in the area so a lowball offer is not recommended. Many banks are so overwhelmed with short sale requests and multiple offers that they will most likely not even counter-offer if you submit a lowball.

Tips to speed up the process

File all the required short sale paperwork in a timely and efficient manner.

Assure the seller they will wait for short sale approval.

Have a strong pre-approval letter.

Put down a sizeable earnest money deposit.

Submit an offer that closely reflects the market value of the property.

Have your agent follow up diligently to track the review and approval process.

They need to stay in touch with the seller’s agent to make sure everything is

being handled in a timely manner.

One more thing….

Here is one more tip. Once you have been pre-

approved for a loan, do not do anything to damage

your credit. This includes buying a new car, racking

up large credit card debt or co-signing for a loan.

Don’t do it! It would be so disappointing to have

the short sale approved, only to get denied for a

loan.