Buying a property that’s in a short sale position requires extensive homework, patience and a commitment to conclude the transaction. Getting a lender to agree to take less than what’s owed on the mortgage may offer relief to the current owner, but puts the lender into a loss position. While owners may offer the home for sale, it’s the lender that must approve any selling price. Presenting a strong offer increases your chance of a successful purchase.
Hire a short sale specialist when working a short sale transaction, as some lenders require their expertise to conclude the transaction. Ask your local real estate brokerage for referrals to agents with this designation before you begin shopping. Ask your agent to give you a comparative market analysis -- homes that have sold within the past six months in the vicinity of a property you’re interested in. Compare only short sale “sold” prices to arrive at an offering price before writing your offer.
Look carefully at the condition of the home, as most short sale owners currently live in the property and have maintained its condition. Defend a lower offering price by noting if the property is vacant, the utilities turned off and maintenance has been ignored.
Offer a maximum of 15 percent less than the lender-approved selling price if the property is in good condition. Make your offer dependent on the market research provided by your agent. Don't lowball your price if you want to get a response from the lender.
Make a large deposit to show the lender you’re serious about purchasing the home. Submit your offer with a first deposit and agree to increase that deposit once the lender has approved the sale. Federal law requires lenders to shorten the time frame for offer acceptance. Making an offer with a strong deposit decreases the amount of time it takes a lender to respond.
Grab the attention of a lender with an all-cash offer. Submit conventional financing paperwork with a preapproved mortgage commitment. A strong credit score and a government-backed loan will take more time to get lender approval, but can succeed. Submit your offer with all financing paperwork attached.
Don't expect the lender to agree to repairs once a licensed home inspector has gone over the property. Negotiate major repairs, especially mold and termite remediation, but know that requests for lesser items are often ignored. Make your offer as clean of contingencies as possible.
Ask the homeowner’s association if delinquent dues must also be remedied before a purchase can be completed. Before you make your offer, get all this information so you can negotiate these additional costs, as they can’t be wrapped into your mortgage.
- Bankrate.com: MSN Real Estate: The Short-Sale Buying Guide for Today’s Housing Market
- Realtormag.Realtor.org: Making an Offer on a Short Sale? What You Need to Know
- National Association of Realtors: Buying Foreclosures and Short Sale Homes
- Fair Isaac Corporation. "Research Looks at How Mortgage Delinquencies Affect Scores." Accessed Aug. 9, 2020.
- National Association of Realtors. "About SFR." Accessed Aug. 9, 2020.
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.