Purchasing a Short Sale Property

If you've fallen in love with a house that is being sold as a short sale, be prepared to be very patient. Short sales are anything but short. The entire process, from purchase agreement submittal to the seller to the close of escrow, can take 120 days --- and sometimes more. The short sale, a process where the seller seeks permission from her lender to sell the house for less than her loan payoff amount, has many more requirements than a standard home sale. Many times, even though the house is located in California, the lender may be located on the other side of the country, further adding to the time it will take to close the sale.

Work with an Experienced Real Estate Agent & Get Educated about Short Sales

Employ the services of a California-licensed real estate agent. These services cost you, the buyer, nothing as the agents are paid by the seller or, in this case, the lender. A good real estate agent can handle all of the contract paperwork and refer you to a qualified lender. You need to know more about short sales and the difference between short sales and other sales (regular sale & reo sale). Find out whether it's the right buy for you or not. If you want to buy as soon as possible and cannot wait couple of months then short sale is not the right choice to write an offer. But if you can wait couple of month then look for short sale homes also in your search criteria and ask your agent to show short sale listings also.

Get Pre-Approved for a Loan

Apply for a mortgage loan. Shop around to find the best rates and terms.

This is important whether you are writing offer to short sale or other type of listings. Pre-approval will make your offer stronger and gets higher priority than others who are submitting without pre-approval. So, make sure you are pre approved with a good lender before your home search.

Making an Offer

Make the offer on the home. Your agent, or the seller's agent, will present you with the California Association of Realtors Form SSA, Short Sale Addendum. This form indicates your acknowledgment that the house is being sold as a short sale. By default, the form allows the lender 45 days to consent to the sale, but there is a space for you to enter your own time period for this event. Consult with your agent as to what time period she feels is appropriate in the current market. This will also depend upon how badly you want the home. Remember, this time period is only for the lender to communicate consent to sell. There are still other contract items, such as the appraisal, that will additionally lengthen the process.

Once the Seller Accepts your Offer & Short Sale Timelines

Even though, seller accepts your offer, doesn't mean that your offer has accepted and you can move forward with that offer. Once you submit the offer, the seller's agent forwards to the seller's lender for final approval. The seller's lender will need to appraise the home and need time for the loss mitigation department to go over the seller's short sale packet. The lender may accept it, reject or counter back to you with their price based on their own appraisal price.

It takes time to know the final approval from the seller's lender after you submit your offer, may be 1 month, 3 months or more. You need to have patience to wait that long for your dream home.

Other Liens

If other liens like HOA, tax liens and others where the seller owes to those lien-holders , could also be a hindrance to the final approval of the sale. Most of the time, bank approves to pay all the liens but sometime they don't, in that case either the seller or buyer or both needs to contribute to get that good deal.

Short Sale Lender Acceptance & Escrow Period

Once the seller's lender has made a decision, they will send the seller and listing agent either a short sale acceptance letter with their terms for approval, or a short sale denial letter. If the short sale is approved, then you move forward with a normal real estate escrow period. After getting the approval letter from the lender then work on to remove your contingencies (inspections, loan approval) and submit your initial deposit to the title within the specified time so that you can close the escrow on time and move to your home. Perform your due diligence inspections during the time specified in the purchase agreement. Be sure to use the services of a California-licensed contractor for all home inspections. Your real estate agent can refer you to a reliable service provider.

Buyers, you can get a deal with a short sale, but it comes at a price. If you have the time and the patience you could be rewarded handsomely.