Some buyers have made offers on short sales, then waited as long as six months to a year, only to be denied lender approval. Approval from the seller’s lender(s) of current loans secured by a short-sale listing is necessary if the proceeds from the sale aren’t enough to pay back the lender and cover the seller’s closing costs. About one in three short-sale listings never sell.
The Obama administration is encouraging lenders to do short sales for their financially distressed borrowers rather than let the property go into foreclosure. Incentives are given to lenders who approve short sales. Slowly, the process has been improving, but it still involves more time and uncertainty than a conventional sale.
The benefit of buying a short sale is that you might get a break on the price and be able to afford to buy in a neighborhood that would otherwise be unaffordable.
HOUSE HUNTING TIP: A critical component to buying a short-sale listing is to pick the right property and the right agent to represent you. You don’t want to set your sights on one of the short-sale listings that will never close. Your agent can help you make the decision about whether or not it’s worth it to pursue a certain listing.
Make sure that you select a real estate agent to work with who is up for the challenge of the short-sale process and understands how it works. A lot of agents have had little or no experience. Furthermore, many of them don’t want to do short sales. You could be steered away from a property that might work for you just because the agent doesn’t want to get involved.
If you discover that you’re missing out on short-sale listings that sell for a price you would have paid, ask your agent or a colleague who purchased a short-sale listing to recommend an agent who is willing and able to work with short-sale buyers.
Before even looking at a short-sale listing, have your agent collect background information from the listing agent. You will have a better chance of closing a short-sale deal if the listing agent has experience doing short sales and has a plan for how to accomplish a sale. …CONTINUED