Buying a short sale condominium is fraught with complex conditions. A lender must agree to accept less than is owed on the mortgage, a time-consuming process that often takes months. The homeowners association’s financial records and the dues status of the current owner must be investigated. Liens against the title must be revealed and removed. Clear all the obstacles before buying a short sale condominium.
Hire a short sale certified real estate agent or attorney, a requirement in most states, to represent you in the purchase transaction. Don’t pay for the agent, but you will be subject to a fee with a real estate attorney. Ask her to provide the most recent comparables for the building you’re interested in. Discuss the type of financing you’re going after, if you’re not paying cash, as this influences what buildings you can buy into.
Investigate whether the building has been FHA approved, if you’re planning to apply for an FHA or VA loan. Use conventional financing if there is no approval, but know that the unit must appraise up to the purchase price. Offer to pay cash to avoid the approval and appraisal step.
Examine the comparables your real estate agent presents. Be sure she’s used only sold short sales for the past six months. Look at price reductions, how long units sat on the market before selling and their position in the building as you analyze each sale.
Offer 10 percent to 15 percent under a lender’s short sale approved price, or close to what your real estate agent thinks the unit should sell for if you want to move ahead with the transaction. Don’t lowball an offer and expect a response from the lender. Submit your mortgage pre-approval paperwork with the offer and agree to increase your deposit once the purchase has been approved. Wait 30 days for an acknowledgement that the lender has received your offer and another 30 days for acceptance.
Meet with the homeowners association representative -- the most crucial aspect of buying a short sale condo -- to get the most current financial report. Ask if the HOA is considering any special assessments. Determine if the building is FHA approved and if not, ask for an explanation of how many owners live in the building and how many units are rented. Also discover how much in back dues are owed for the unit and who is expected to pay the delinquency. Discover how the association plans to cover its debts if it has substantial outstanding dues. Get a copy of the condominium rules and regulations to determine if you can live under the structure laid out in the guidelines. Read the rental restrictions if the condo is a temporary step to home ownership.
Hire a licensed home inspector after your purchase has been approved by the lender. The inspector examines the unit and the building, giving you a detailed report on their condition. Don’t expect the lender to do any repairs. Be sure all the appliances remain in the unit and that it looks the same as when you wrote the purchase contract. Cancel the contract if the report indicates extraordinary expenses are needed to bring the unit into working order and if the building has been neglected and needs extensive work.
Do a final walk through of the unit the day before closing, checking that it looks the same as when you wrote the offer. Be sure all liens have been removed from the title. Instruct the lender to halt any foreclosure action that may be in progress.
Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.