You may want to consider purchasing a house that is about to be foreclosed on by a bank, known as a short sale, when you are in the market for a new home. The owners still maintain possession, but the bank is in the process of foreclosure proceedings. During this phase, the house may still have working appliances, running water and electricity. Once the foreclosure takes place, the bank will disable appliances, removing doors to prevent accidental injury. After foreclosure, the house will be winterized, sealing off toilets and sinks. During the short sale phase, you may still get the house for a great price so the bank can avoid foreclosure proceedings and the expense involved. While your offer to purchase the home will be presented to the owners, the bank ultimately must approve your offer.
Is Buying a Short Sale Better Than a Foreclosure?
Submitting Your Purchase Offer
A short sale home will be listed with a real estate agent for a specific price and have a for sale sign in the yard. The price may be lowered after several weeks if no purchase offers are submitted. You cannot tell by looking at the home that it is a short sale; your real estate agent would need to inform you of the status of the home. You can submit an offer through any real estate agent to purchase the home for any amount. Do not concern yourself about offending the seller with too low of an offer since the lender will be deciding. Your offer will be submitted to the lending institution that currently holds the mortgage on the home. Once submitted, your offer will be accepted or denied; you will not receive a counter offer. However, you can submit as many offers as you want, increasing each offer if you are interested in the home. The lender will inform your real estate agent about the status of your offer.
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Talk to your lending institution prior to making an official purchase offer on a short sale home. Your real estate agent will expect a letter of commitment from your lender for financing the home within 48 hours of your purchase offer being accepted by the current mortgage holder. Because short sale homes are typically priced under appraised value, you should not have to worry about the house appraising high enough. You just need to qualify for a mortgage in the amount that you are offering for the home. As with any purchase, closing may take 30 days to allow for title work and financing. You may request immediate possession at closing.