What Does Short Sale Mean to a Buyer?

A short sale home can be a bargain.

Home buyers can purchase short-sale properties at a substantial discount below market value. However, these transactions can involve long delays and many disappointments, as the seller's lender must agree to take a loss on the sale.

Identification

A "short sale" occurs when a lender allows the owner to sell the home for less than the mortgage balance. The lender typically approves a short sale only if the seller is on the verge of foreclosure and the lender would lose less money on the short sale than on a foreclosure.

Time Frame

Short sales are almost never fast because the lender must evaluate the seller's situation and the buyer's offer and make a decision; that can take many months. Buyers can improve their chances by prequalifying for financing and looking for homes on which a short sale has been preapproved by the lender.

Warning

Home sellers who are near foreclosure rarely have the means to keep up the maintenance on their home. That means the buyer will typically get the property as-is and with all of its problems, which could turn out to be quite expensive.

References

• Realty Times: Top 10 Home Buying Tips for Short Sales
• Bankrate: 10 Steps To Short Sale Buying