Short Sale Buyers Need To Know

Buyers are attracted to short sales because of price – no one can compete with the lowball pricing of a distressed sale. However, there is more to consider than purchase price alone. Purchasing a short sale home is unlike any other home purchase (normal or bank-owned). Buyers need to armed with knowledge, be informed, ask questions, understand the process & know what to expect before writing an offer on a short sale home.

The questions below are fundamental information the listing agent should freely provide when asked. If the listing agent will not provide this info or answers ‘I don’t know’ to any of these questions - move on, find another home. Trying to pursue a short sale home without this basic knowledge is taking a stab in the dark & you will most likely end up empty handed after investing time, money & energy on the process.

Who is the existing lender? Every short sale transaction is handled on a case-by-case basis - no two short sale transactions are the same (even within one lender). Every lender has different timelines, requirements & business processes. Lenders have ‘reputations’ for their short sale handling: some lenders are aggressive in closing short sales within 60 to 90 days. Other lenders ignore the transaction or do not respond in a timely manner…then weeks (or months) later, the buyer tires of waiting & walks.

Is there one lender/lien, two lenders/liens or more? Closing a short sale purchase on a home with one lender/lien is a challenge in and of itself. Add multiple lenders/liens & the hurdle quadruples (not doubles!) in size. It is all too common for that second lender/lien to reject the short sale & derail the entire transaction. If the second loan is with the same primary lender, the hurdle becomes somewhat easier to navigate.

What is the expected response time on an offer? You find a home you want to buy, you make an offer & like all buyers, want to hear immediately if your offer is accepted...you want the home! With a short sale, response time to an offer is 45 days at best, though majority of lenders are still quoting 60 to 90 day response time. Are you prepared to wait around one, two, three months (or longer!) for a response?

Are there any offers currently being considered? Listing agents will commonly accept numerous offers in order to have ‘back ups’ for the all-too-common 1st buyer who walks away. Since short sales are considered by the existing lender on a case-by-case basis, a ‘back up’ offer cannot simply be inserted in the transaction if & when the 1st buyer walks. The listing agent starts from scratch with the short sale package, the ‘back up’ offer that has slipped into primary position & resubmits the entire short sale package for consideration.