What You'll Learn
- Short sales can be priced at or near market value
- There are many people involved in a short sale transaction
- You’ll need to patient and flexible if you’re looking to buy a short sale
If you’re looking to buy a home, you may have heard about short sales. You may be wondering: What is a short sale? Is a short sale right for me? How do I buy a short sale?
What is a short sale?
When someone needs to sell their home but the mortgage balance is greater than the market value of the home, the home may be sold as a "short sale." In this case, the lender and all parties involved agree to a sale price that is below the mortgage balance owed on the loan. This agreement gives the current homeowner the opportunity to sell the home at or near the current market value.
The outcome of a short sale can be positive for all:
- Seller: A short sale allows the current homeowner to avoid foreclosure by selling their home for less than the amount owed on their mortgage loan.
- Lender: A short sale offers a way to avoid many of the costly impacts of foreclosure.
- Homebuyer: A short sale can provide favorable buying opportunities, with some being priced at or below market value. Additionally, since short sales are often occupied by the seller, they are typically in good condition.
Buying a short sale can take more time than a regular home purchase because they involve negotiations among the current owner, lenders(s), and the homebuyer.
The first two steps in buying a short sale are to determine if you are a good candidate for one and to find a real estate professional with experience in buying short sales.
Am I a good candidate to buy a short sale?
This is one of the most important questions you’ll need to ask yourself before you consider buying a short sale property.
Generally, you’re a good candidate, if:
- You’re patient. Purchasing a short sale requires all of the different parties to approve the deal which typically takes several months – sometimes more. However, if the mortgage is owned by Freddie Mac or Fannie Mae, the time period may be significantly shorter.
- Your financing is arranged. It is important that you are approved, or at least pre-approved, for financing once you begin looking at short sale properties.
- You’re flexible. If you’re flexible with your move dates and don’t have to sell a home or break an expensive lease to qualify for financing, you may be a good candidate.
Learn more about making an offer on a short sale.
Short sale purchases can take more time than a typical home because of the many people involved
You’ll need to be patient and flexible if looking to buy a short sale
If you need to move quickly or by a specific date, buying a short sale may not be right for you