By: Felicia Pinto
In today’s real estate market, a potential home buyer looking to purchase a home, will almost surely come across a short sale.
A short sale is when a lender agrees to accept less than the outstanding mortgage balance. When home owners can no longer afford to make mortgage payments, rather than allow the home to be sold in a foreclosure sale, they will negotiate a short sale with their lender. It’s often referred to as a, “pre-foreclosure.”
A short sale can often be a bargain for a purchaser, but you need to know a few things. First, short sales can take a long time because the seller’s lender must approve the sale. The seller must submit a short sale package detailing their financial situation, and must negotiate the purchase price. The lender is going to make sure it gets the best possible price, so you may end up waiting several months for an approval.
Second, if the lender does approve the transaction, you will have a deadline to close. Often, the lender will give a 15-30 day window to close, or the approval is rescinded. It’s a good idea to have your mortgage in order so you can adhere to the lender’s deadline. If you are not able to close within that time frame, the seller may be able to obtain an extension from the lender, but that’s not always the case.
Third, you are purchasing the home in “as is” condition. Procuring a home inspection prior to entering into contract on the home is extremely important. The seller usually does not have the funds to fix any physical problems with the home, so you need to know what issues exist, if any, so you can walk away if the problems will be too costly to remedy.
Lastly, once your offer is submitted, the seller’s lender may counter. If the counter offer is not considerably higher than your original offer, and it is within your budget, you may consider accepting the counter offer. It is entirely possible you are getting the home for well under its true market value. Your other options are to try and negotiate with the lender and counter back, or walk away from the transaction.
The short sale process is not for the faint of heart, but in the long run, it can truly be worth the wait if you have the patience.
Felicia Pinto, Esq. is an Associate in the Real Estate division at Isaacs, Devasia, Castro & Wien LLP. For more information on this topic you can contact her at 917.551.1325 or at fpinto@idcwlaw.com.