The term short sale refers to a situation where a home is marketed for less than the homeowner's outstanding balance on the mortgage. Sellers in this predicament are trying to avoid a foreclosure. In some instances, a seller may have already defaulted on the mortgage.
If you've been looking at enough homes, you'll notice homes being sold as a short sale feature a lower sales price. But you have to be careful before jumping to make an offer. Even though the sales price may be lower than the outstanding balance, the seller could have originally overpaid for the property or the real estate market may have caused property values to drop. Another point to consider is you may be responsible for extra fees that aren't included in the sales price.
One major disadvantage to buying a short sale is you must wait for bank approval of your offer. This is due to the fact the bank will be losing money in the process. The bank must weigh the pros and cons of a short sale versus the extra costs and time involved with a foreclosure.
Unfortunately, waiting to hear from a bank can take several months, regardless if the seller accepts your offer immediately. Expect the entire process to take a while with no guarantee the bank will accept the deal, especially if the seller has been frantically advertising the home for significantly less than what's owed on the loan.
After evaluating all the possible consequences, you're still prepared to proceed with trying to buy one, make sure you choose a Realtor competent in this area. The first step your agent needs to do is find out how much the seller owes the lender, if it's significantly higher than what you're prepared to pay, the bank won't accept your deal.
Your agent also needs to investigate if there are multiple loans against the property. If additional ones exist, your agent will need the cooperation of all lenders to approve the deal. The more lenders involved, the less likely your deal will be approved since most lenders won't forfeit their interest in the property without some compensation to make up for their losses. To find out if multiple lenders exist, just have your agent pull the deed to the property.
Before pursuing a short sale, make it a point to ask your agent to contact the seller's agent and find out what preliminary short sale steps have already been taken. A bank will only consider accepting a short sale if the seller can document they are in financial straits. The fact of the matter is a short sale can't be finalized without the approval of the bank. Unless you're not in a hurry to buy a house, you want to be sure the seller has confirmed with the bank a short sale is a viable option. There's no point in wasting time pursuing a property if you're convinced the odds of having the bank accept a short sale are nearly impossible.
Want to find the best deal on Irvine homes for sale? Check out these local Irvine Realtors to help you find one.
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