In light of the current financial crisis, short sales have become increasingly common in the real estate market place. For those of you unaware of the definition of the short sale, it is an alternative for seller’s who cannot pay their mortgages. Rather than the seller filing for bankruptcy or the bank beginning the lengthy/costly process of foreclosure, lenders agree to allow the homeowner to sell their property for a value less than what is owed to the bank.
What does this process entail for a buyer however? Recently, I have viewed more and more short sale properties with prospective buyers. I find myself explaining what the process entails as well as the pro’s and con’s of such a transaction.
The short sale process for an interested buyer:
When a buyer decides they would like to purchase a short sale property, offer paperwork will be written up as normal. This offer will then be submitted for the seller’s approval.
If the seller accepts the offer, a home/pest inspection will most likely take place and the buyer will move forward in procuring a mortgage if necessary for the home. Next, the purchase and sale agreement will be signed by the seller and buyer. The catch here is that the offer amount must still be approved by the bank/lender. The purchase and sale agreement will therefore have a clause stating that it is subject to third party approval.
The buyer will not close on the property until the bank has reviewed and approved all contractual paperwork.
The biggest con to the short sale process is waiting for third party approval. This typically takes 60-90 days and in certain situations longer. Buyer must have the time and patience to engage in the short sale process. Additionally, short sales are typically sold in an “as is” condition. Therefore any issues that arise in a home inspection will not be fixed by the seller but instead will be the buyer’s responsibility to remedy.
The important thing to remember is that if you are not in a rush to move, short sales can be quite rewarding. Properties can be attained for great values, at highly discounted prices.
The best way to prepare for a short sale purchase is by educating yourself. Make sure you are working with a knowledge real estate lawyer and agent (like those of us at CondoDomain!). Surround yourself with professionals who will walk you through the process, explain everything in depth and protect your interests!
For more information on short sale opportunities in the Boston condo market or the short sale process give me a call: