Short-Sale Process for Buying a House in Foreclosure

Successful completion of a short sale is key to preventing foreclosure.
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The often arduous and drawn-out process of buying a short-sale property can result in big savings if you have the time and patience to see it through. A short sale happens when the sale's proceeds fall short of covering the mortgage indebtedness. Short-sale homes are often in some stage of foreclosure; that is, the lender has already begun the repossession process. A short sale can stop a foreclosure if completed in time.

The Basics

The foreclosing lender reviews the terms of a short-sale deal before approving it. The foreclosure process does not necessarily come to a halt during a short sale. Although permitting a short sale can save the lender the hefty cost of foreclosure and the hassle of maintaining the property until it sells it, approval isn't guaranteed. Lenders must follow the timeline established by the state in which the home is located. The lender can continue taking steps toward foreclosure as it decides whether to allow the short sale.


You can find short sales by word of mouth, in for-sale-by-owner ads, or in your local multiple listing service. If you employ a real estate professional's help to find the house, you'll want one who is well-versed in the short-sale process, according to Bankrate. A real estate salesperson or attorney can help you view the property so you can inspect it, find liens, or amounts owed on the property's title, and negotiate the price based on comparable sales in the area.


Most homebuyers purchase short-sale properties using financing. Getting your loan in a timely manner is imperative in order to successfully complete a short-sale transaction. Delays in the financing process can cause you to lose a short-sale deal that has already received lender approval because approvals expire. With a tentative foreclosure date on a home, a buyer's inability to close on time due to financing delays can cause the lender to proceed with the foreclosure.

Due Diligence

Your lender will do its due diligence -- or research -- to ensure the home's condition is up to par through an appraisal inspection. An appraisal gives the lender an idea of how a home measures up against comparable properties in the area. Short-sale buyers benefit from ordering a home inspection because they often reveal defects, needed repairs and hazardous conditions. Getting a professional inspection can help you determine if the short sale is a good deal after accounting for needed repairs or renovation. Short-sale property owners are usually financially distressed and unable to pay for repairs, so the buyer is often responsible for them.

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