Many aspiring homeowners jump on the chance to buy a home at a price lower than market cost, but as with anything in this world, you rarely get something for nothing. Though you can snag a great deal on a short sale, you must also be aware of the difficulties that may arise throughout this process.

What is a Short Sale?

A short sale occurs when a seller’s lender is willing to accept a payoff at a discounted rate. Basically, the seller owes more on the home than the price at which it is currently being sold. Homeowners may find themselves in this predicament not just because of a default on their mortgage, but also because of excessive borrowing against their equity or a severe drop in their home’s value.

Time and Money are Major Factors with Short Sales

If time is not on your side, you may want to avoid getting entangled in a short sale. Generally, it can take anywhere from 1-2 months to 3-6 months to close. If you are in the process of selling your home before purchasing a short-sale property, it may not be the right time for you as well. Lenders like to see a lot of flexibility as far as closing. They also value cash offers or at least a borrower who is well qualified and ready to make a large down payment. If you fall into these categories, the lender will be more apt to accept your offer.

Don’t Go Through the Process Alone

You must acquire the assistance of an expert if you want to buy a short sale property.  Not just any real estate agent will make the cut. Find an agent who has experience specifically with short sales. He/she will know the exact pitfalls to avoid and will be on top of the process so that it does not spiral out of control and end in failure.

In addition to a skilled agent, you should garner the services of a great real estate attorney. An experienced real estate attorney who understands the short sale process can tip the scales in your favor with lender approval and also interject the proper language in your contract for any special provisions you may need.

You should also question the experience of the listing agent. Is this his/her first short sale? Has he/she ever closed a short sale? If the answer is “no” to these questions, though the house may look like a good deal, it may not be worth your time to pursue it. With all of the details of this process, an inexperienced listing agent will most likely result in failure.

Making an Offer on a Short Sale Property

Be advised that though the seller may accept your offer, the lender still may not. Before you make an offer on a short sale, you must know the answers to these questions:

• Was a notice to foreclose filed?
• Who is in title?
• What is owed to the lender?
• How many mortgages are on the property? (The more lien holders involved, the longer the process will take and the more difficult)

Consult with your agent and get the right answers so you can make an offer that is approvable to your lender and also to you.

What you Should Know about Short Sales

Many things can go wrong during the process of purchasing a short-sale property. Lenders will most likely counter offer especially if you offer too low, which can prolong the process. Lenders are interested in cutting their losses as much as possible. Perform your research upfront and discuss your offer with a qualified professional before you submit it. This one practice can help you avoid months of wasted time.  Even if a lender approves your offer, the seller could back down on the offer for many reasons. Your lender can also revise terms and conditions of the contract mid-process that could prolong the deal or completely destroy it. This is another reason why it is essential to deal with qualified professionals who are familiar with the short sale process.

Additionally, the property you buy may be in need of extensive repairs because you are buying the property in the current condition. Factor in these repair costs when determining your financial eligibility. If an inspection reveals an issue, the lender will not remedy these issues. The house is sold “as is”.

Don’t Rush the Short Sale Process

Don’t let a low home price start your interest in short sales. Perform the research and prep work before you even start your search. Once you are prepared, find a property with a knowledgeable listing agent and discuss your offer with an experienced real estate agent. Gather the experts and be prepared to show your financial readiness. Your success in these steps will put you ahead of 90% of the general population and put you that much closer to a successful short sale process.