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Buying A Short Sale


A short sale is when the Seller is negotiating with their lender to accept a discounted payoff in order to avoid foreclosure. The listed price is typically lower then what the Seller owes on the property. The Seller may also be in default (stopped making mortgage payments) and should have received a letter from their mortgagee as to their current status. Typically the Seller has to provide financial information and explain their hardship and inability to continue to make mortgage payments.

The Seller is working to avoid foreclosure and is motivated to have your offer accepted, although the Seller may counter your offer if they think the bank may reject it and waste the Sellers marketing time. The short sale approval can take up to 90 days, so patience is required!

The process usually requires that you have your title company prepare a HUD statement so the Seller's lender can confirm their closing costs based on your closing date. Be sure to have a closing date that is at least 90 days out . You can also give a time frame for when the Sellers lender has to respond by in case your situation changes as you can always extend your time frame for acceptance bearing in mind you may not hear a response for 90 days.

The Seller should sign your offer and submit to the litigation dept which will assign a negotiator. The negotiator may order an appraisal or Broker Price Opinion to make sure the property is not selling way below current market value.

If the Seller still occupies the property they can supply information as to the site and the utilities may still be on.  Most financing options will consider the short sale the same as other resale's although you have to watch the rate changes over such a long time frame for acceptance. If the property is vacant you should request the Sellers' lender secure the property and maintain its condition.

Ask the listing agent whether there is a second mortgage that also needs to be notified and if the short sale process has been started with the second mortgage as well as the first. Usually the first will determine what the second will receive should the first mortgage accept the contract.

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