Buyer Short Sale Knowledge

Buyer What You Should Consider Buying Short Sale

Buyers - What you might want to know about buying a Short Sale

Price In terms of the sales contract, if the price is too low, the lender may not approve the short sale, the seller may be liable for a deficiency, and the buyer may have lost valuable time. Buyer's representatives should prepare a competitive market analysis (CMA) for the buyer so that the buyer can be confident with his or her offer.

Timing: Lender Approval If the timing stipulated in the rider to the buyer's offer is too short or if the lender believes that the transaction does not have a reasonable chance of closing, the lender will not approve the short sale.

Timing: Home Inspection In an effort to minimize cash outlay, buyers may want to conduct the home inspection after the lender has approved the short sale. Listing agents who allow this may jeopardize the chances for lender approval. Buyers may deprive their chances to negotiate for repairs.

Timing: Mortgage Application For buyers, there may be a very short time between the lender approving the short sale and closing. Buyers should seek mortgage approval as soon as practicable. Lenders in some markets may grant an extension period after approving the short sale for the buyer to obtain financing.

Interest Rate Issues To lock in attractive interest rates, buyers may pay money upfront. However, a "lock in" clause gives buyers a possible out of the contract, which may jeopardize the chances for lender approval.

Timing: Earnest Money Earnest money must be deposited as state law requires. However, because short©\sale transactions require lender approval, the timing of earnest money deposits can bring forward a number of concerns. If the earnest money is not required until after lender approval, there is nothing to bind the buyer. If the earnest money is required prior to lender approval, the buyer¡¯s earnest money can be tied up while awaiting lender approval.

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