California Apartments and Homes Blog

Three Steps to Securing a Short Sale

A short sale happens when a property is sold way below its market value, so low that it can be considered worth a lot less than its original value. This happens when the homeowner wasn’t able to pay his monthly payment causing the value of the property to decrease. When this happens, the bank that financed the purchase of the home will agree to sell it at a lesser price – to shun foreclosure and extra expenses. Short sales actually give home buyers the chance to buy home cheaply. But always remember that you will only be able to make the most out of it when you know what you’re doing or if you have someone to guide you.

Who has the Upper Hand in Short Sales?

Honestly, short sales are considered infamous since everyone has something to lose. The owner obviously will have bad credit since he isn’t able to pay his monthly mortgage. However, it isn’t as bad as having your home foreclosed. Also, the owner is relieved of debt. The lender on the other hand loses money, but won’t be obliged to go through the legalities and expensive costs of foreclosure. The new home owner, or the buyer, will own a house for much less, although it will need some work. The question now is how can one find a good deal on a short sale?

Step 1: Looking for a Home

When looking for a cheap home to buy, first check the houses in the area that are deemed to foreclose. There are listings everywhere – real estate agencies, your local courthouse, or even online home builders. By using home finder tools available for you, research and know the amount that is owed on the property you are eyeing. Study it and verify if the value indeed went down. The trick here is not to get the home which owes the cheapest amount. It is better to get the property which owes the biggest amount. What does this mean? Obviously, if there is still a huge amount owed, it signifies that the property is quite new. These homes also have owners that have difficulty making payments.

Remember: low value + high mortgage = best short sale option

Step 2: Approaching the Owner

Always make sure that you know the liens and mortgages of a certain property. Of course, the best, most accurate way of doing it would be talking to the owner. Ask the seller if there is a possibility that the property will have a short sale. As opposed to foreclosure, they will be more than happy to entertain you. Define to yourself how much you are willing to spend for the property and where you will get financing. If the lender agrees, the short sale will most probably go through real quick.

The owner should prepare a letter of authorization allowing the lender to speak with you about the loan. It is also required for them to make a letter of hardship and have the bank authorize it. This letter should explain why they can no longer afford the monthly payments. With this letter, you should also include some proof of reasons. When you speak with the lender, make sure you bring these things.

Step 3: Contacting the Lender

When you are interested in buying a property in a short sale, contact the lender. Talk to your agent or the bank to help you with the transaction and make the offer. It is a lot beneficial to have someone experienced to take over the legal stuff and documentations you might need for a short sale. You will be asked to fill out the short sale application from the lender. Bring with you a purchase contract that is signed by the seller and you altogether which states your agreed price. Don’t be so sure, however, that the seller would actually just go ahead and agree with the price you are offering. So to make your chances better, present them with a proof of your income and an offer they cannot reject. Most possibly, they will accept this offer just to avoid the hassle and costliness of foreclosure.

The lender can make a counter offer. In this case, you should expect it. When you make your initial offer, keep in mind your limits. Have a set maximum dollar amount you are willing to spend and if they don’t agree with it, then be ready to walk out. If they accept it, good. You will get to have the house you want at a very low price.