February 23, 2011

What is a Short Sale and How Does it Work When You're the Buyer?

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A bank short sale is when the selling price of a home is less than the mortgage amount owed. I’ll give you a quick tip on how a short sale works for the buyer. The most important number 1 item when purchasing a bank short sale is the buyer must be pre-approved with a lender. If you’re paying cash your financial institution must supply a “sufficient funds” letter. These documents must accompany your offer to purchase contract that is submitted to the bank. The easiest lending on a short sale is a conventional loan and the buyer puts down 20% of the selling price. Example - the home is $100,000.00 your down payment required would be $20,000.00. If you can only put down 3.5% and qualify for a FHA loan then the home you pick better not be too distressed, i.e.: peeling paint, broken windows, holes in roof etc. The reason being is the seller usually has no funds to make any repairs on the home. When making an offer on a bank short sale the buyer can’t have a home sale contingency (no home to sell). The buyer must also have patience because ultimately, you the buyer, must wait until the seller’s lender accepts the offering price. The banks time frame can vary depending on how many mortgages are on the property & who the lender is. Cooperation from all the parties involved in a must. Once your offer has been accepted you can’t be late on any payments to your debtors and you can’t take out any other loans during this process. I had a buyer in December 2010 who was late on a payment and the buyer’s lender decided to recheck the credit before finalizing the loan. The buyer’s credit score dropped because of the late payment and the buyer’s lender dropped him. Just like that! We were due to close within 2wks of this happening. The banks are very strict about this policy. To avoid this from happening you need to follow some very simple rules.

It’s your turn to have your house warming party. Let’s have your short sale success story to be the conversation amongst your family & friends. For more bank short sale tips or help with purchasing a bank short sale please contact me directly. 

Posted by:  Mary Petersen

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