While a short sale home can ensure you buy a property at a reduced price, the process can often be time-consuming and have unique perils. Learn more here!

If you're in the market for a new home but struggling to find one within your budget, a short sale home listed below the market price could be your ideal option! For buyers, a short sale means a highly motivated home seller. That often grants you better leverage and, consequently, lower prices. But that's not a reason to cut corners and overlook significant issues. If anything, a short sale home requires more attention to detail than a conventional real estate transaction- and infinitely more patience.

Here are 7 tips for buying a short sale home:

Pay Cash or Get Preapproved

Any lender agreeing to a short sale will have lost money on a risky investment, so they’ll want to be sure that you’re capable of buying the house. You may have an advantage over other buyers if you can pay cash. Moreover, there'll likely be multiple bids on the short sale home, and since you want to get the house at the best price possible, being preapproved will make your offer stand out with the seller and their lender. Attaching a preapproval letter to your offer shows that you're serious about buying the house and have the finances to make the purchase.

Work With a Skilled Real Estate Agent

Hire a skilled real estate agent specializing in short sale homes to offer insights and protect your real estate interests. An experienced agent will help you research the property, its value and condition, and the number of mortgage liens against it.

Read between the Lines to Understand the Listing

Sometimes a listing can be flagged explicitly as a short sale. If not, some lingo in the listing may provide clues that they’re short sales, including “notice of default,” subject to bank approval,” or “headed for auction.” The county or city clerk’s office has lists of people in loan default or preclosure. However,  note that there’s a period of generally about six months after the homeowner’s last missed mortgage payment before the lender will foreclose. So, these homes could become short sales during that period. 

Research the Short Sale Home

Before making an offer:

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  Work with your agent to learn as much as possible about the house.

  
  


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  Compare the listing price to listed and recently sold homes in the neighborhood.

  
  


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  Determine how much the seller owes the lender- that amount will be more than the house's actual value.

  
  


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  Moreover, enlist a title company to conduct a title search on the house. That’ll inform you about existing liens and lien holders, which can be entities or people that have a claim on the property. 

  
  

Don't Skip Home Inspection

A short sale is typically an as-is purchase. As such, you shouldn't expect to negotiate with the seller to lower the asking price if the home inspection reveals issues. However, don't skip the inspection- a home inspection can uncover issues, helping you budget for immediate and future repairs needed for the house to be livable. Besides, it can still uncover deal-breaker problems that may turn you off from buying the home.

Don't Lowball Your Offer Too Much

While a short sale home is listed below the market value, avoid coming in too low with your offer. The lender is trying to recoup as much of the remaining home loan balance as possible, so your offer should be close to the listing price if you want it to be accepted. You should work with a real estate agent who understands the local home values to determine a realistic offer.

Include Contingencies in Your Offer

Many things may go wrong during the short sale process. You might discover issues more than you’re able or willing to invest in repairs. Severe weather damage and vandalism may occur prior to closing. If you put money down, you want to be able to walk away without losing your deposit. As such, it’s vital your real estate agent should include contingencies in your contract offer. These conditions can state that the contract isn’t valid unless you secure a mortgage or unless the homeowner maintains hazard insurance on the house. 

Need Help Buying a Short Sale Home?

Ready to start your short sale home search? Give Kathy Hames Team a call today! We'll show you short sale listings that meet your criteria and guide you through the short sale home buying process to ensure you get the most out of the real estate transaction.