What's the typical process when buying a short sale?

The process for purchasing a short sale has many of the same basic steps as any property purchase, but each of those steps have their own unique characteristics.

Of course, as with any real estate purchase, the very first thing you need to do is to get your financing organized. In order to submit any offer, you will need to provide proof of ability to pay for the transaction whether by cash (you'll need a bank statement less than 30 days old), personal financing (e.g.line of credit statement less than 30 days old) or a credit pre-approval. You need to get into a relationship with a lender so that once you've obtained your pre-approval it can be re-issued without a full run of your credit, because repeated credit checks can bring your rating down.

Partner with a Realtor. You absolutely need an advocate who has the training and support to get through the short sale process. Ask what their experience and success rates are, some companies and agents are better at closing short sales than others.

If you are in the position to be able to consider short sales, do consider all types of sales. There are bargains to be found in all categories, just as there are gems and turds in all categories. Limiting yourself to just one may prevent you finding your best property.

Prepare yourself for a long process. While there are some short sales that can close quicker (few, very few!) the average time-span between offer and closing is 6 months and can be as long as a year, if it ever closes at all. So, don't terminate your lease yet! Be prepared to place a chunk of change in the form of an Earnest Money Deposit where you will not have access to it for the length of the closing process.

You will need to prepare yourself for disappointment. In Orlando more than 30% of short sales that go to contract never close. If you do find a great home and get your offer accepted, don't stop looking for other options. You absolutely cannot count on ever getting to the closing table.

As with placing any offer, make sure you read and understand the offer contract thoroughly. Short sale contracts are more complex than a traditional sale's. If you are confused or concerned, please have a real estate lawyer go over it with you! It will be well worth the few hundred dollars vs. worrying you've made a mistake.

Getting an offer accepted on a short sale usually requires very little negotiation and it is not unusual to go to contract substantially below asking price. What you've got to remember is that your offer is 100% contingent on the sellers' lien holders approving the sales price. You will need to be prepared to begin the negotiation process again once the lender's representative(s) enter the conversation. You also need to be familiar with the "AWC" (Active With Contract) status that has been introduced to our MLS. Many sellers are soliciting multiple offer contracts to be held in line for the sellers' lien holders to review. This is a good thing for the sellers (and the lien holders) but puts offerors at a distinct disadvantage, because what's the point of having a contract accepted if it's not really accepted? Your offer can be written to require that once an offer is accepted the listing is placed "PNC" or "under contract", but the seller may not accept that. You also need to keep in mind that the negotiations with the sellers' lenders is not just with you, it is also between the sellers' and their lenders too. The seller is negotiating forgiveness of what is often a substantial amount of money. The bank may require them to pay a lump sum of money or take on a new unsecured debt and the sellers may not want or be able to meet these requirements and back out of the process completely. So, until your offer has received that 3rd party approval, you need to behave as if you do not have a contract at all and KEEP LOOKING.

You need to be prepared to pay more closing costs with a short sale. The sellers are most likely in a position that they are unable to provide much in the way of closing cost assistance. Repair allowances may not be available. There are often negotiation fees that the buyer may be required to pay.

But, don't give up hope! Short sales can and do close! As long as you are prepared and willing to go along with the flow, we can get this done.

Happy Hunting!