Finding the right home can be a challenge in and of itself. When you opt for a short sale condominium; however, things get even more complicated. As a condo buyer, you must proceed with caution and investigate the association and complex you're buying into. You must also determine whether a transaction in which the seller's lender agrees to sell for less than the mortgage amount is an endeavor you're willing to take on.
A struggling condo owner's mortgage lender voluntarily agrees to take a loss on a short sale when a review of seller finances and market conditions prove it's more cost effective than foreclosing. When financing the condo purchase, the buyer and his lender must investigate the condo unit and the HOA to determine the property's financial viability. If paying cash for the condo, a buyer must still perform his due diligence to ensure that the home is a sound investment.
Most lenders will not consider a seller's short sale request until he obtains an offer to buy the property. When placing a bid, the buyer may be required to prove he has the credit and money to move forward upon short sale approval. Depending on the short sale lender, a pre-approval letter from a reputable lender may suffice; however, proof of down payment funds and other liquid assets may also be required with an offer. Short-sale lenders try to ensure that a buyer is able to gain financing and close within 30 to 60 days of approval. Short sales are time-sensitive transactions due to the impending foreclosure and losing a buyer often entails restarting the approval process.
Because lenders can take several months to respond to an offer, a buyer may place a clause in the contract stating how long he is willing to wait. By letting the seller and lender know the time limitations in advance, the buyer can move without risking any recourse from the seller if the lender takes too long. A buyer may further protect his interests when buying a condo by making the sale contingent upon an appraisal of value, a satisfactory home inspection and a review of the HOA's bylaws and financial information. Most lenders for a condo purchase require an appraisal and HOA review.
Pinpoint problems with the home and the HOA before closing and negotiate a remedy with the seller or his lender. For example, property defects such as leaks, plumbing and electrical problems within the unit are the seller's responsibility. A buyer may request the repairs; however, many financially -strapped short-sale sellers don't cover these costs. In an as-is condo sale, the buyer fixes problems before or after closing. A seller who falls behind on HOA dues may also need to be bailed out of this problem to sell his condo. An HOA lien placed on title prevents a short sale. Because most short-sale lenders refuse to cover this seller expense, the buyer often takes the hit to make the deal happen.
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- The Impact of a Short Sale on My Credit Score
- How a Buyer Can Speed Up the Short Sale Process