When a homeowner gets behind on his house payments, a short sale provides a less damaging alternative to foreclosure for the seller. With a short sale, the lender agrees to accept a sales price regardless of what is owed on the mortgage and forgives the difference. As a buyer you can sometimes get a great deal through a short sale but you should be prepared for the hassles involved with the short sale process.
Prepare For a Long Process
If you’re in a hurry to move into your dream home, you’ll want to avoid buying a home in a short sale. It can take months to get a response from a lender and move the negotiating process with them. If you’re renting, you’ll need to start looking several months in advance of the end of your lease, unless your landlord offers a month-to-month agreement.
Be Aware of Maintenance Issues
When a homeowner falls behind on mortgage payments, it’s likely they aren’t in a position to maintain or repair their home either. Buying a home on a short sale means you’re agreeing to buy the property as-is—leaky roofs, old carpeting and all. Hopefully it won’t be in even worse shape by the time the deal closes. You might wind up using all the money you saved on the short sale to do any necessary repairs before you can move in.
The Other Guys
Once you make an offer for a short sale, you may find out that the mortgage lender is not the only person you’re going to have to deal with. If the homeowner has any liens on the property, those debts will have to be settled first. Lien holders are less likely to forgive debts owed to them and you may very well have to move on to another property. Research the title on the property you’re interested in before you begin the short sale process.
All for Nothing
Unfortunately, while you’re waiting patiently to find out if your short sale offer is going to be accepted, the homeowner might be sinking deeper in debt. Unless you know the seller personally, you won’t know their financial situation. The seller may not be able to wait for the lender to negotiate a short sale because of his other outstanding debts. This could eventually lead the homeowner to file for bankruptcy or eventually fall into foreclosure. In this case, you may have been waiting patiently for nothing.
Based in South Florida, Leann Harms has been writing since 2008. Her design, technology, business and entertainment articles have appeared in "Design Trade" magazine and Web sites including eHow. Harms has a Bachelor of Arts in English from Florida Atlantic University.