HICKSVILLE, N.Y., — In the real estate industry, a short sale refers to a house being sold for less than what the homeowner owes her lender on it, so the loan will not be fully repaid. The reason behind a short sale may vary from situation to situation, but typically a homeowner would prefer to move forward with a short sale rather than see their home foreclosed. Similarly, lenders may feel more inclined to participate in a short sale, where the financial loss they experience may not be as large as if the home went into foreclosure.
In a short sale, the proceeds from the transaction are less than the amount the seller owes between mortgage debt and seller fees, which is partly why they are difficult to complete. These types of sales also require all parties who are owed money to agree on the terms of the sale, usually resulting in a lesser payout. For this reason, short sales move very slowly and require large amounts of paperwork. While short sales were more common during the mortgage crisis between 2008 and 2012, it is still possible to encounter a short sale in today’s housing market. In the event that this type of home is for sale, Long Island real estate lawyer, Markotsis & Lieberman P.C. list 5 things to know before purchasing a short sale home.
- Find an experienced short sale agent. Before moving forward with purchasing a short sale home, it is important to have a team of experienced professionals closely monitoring the process. A real estate agent with short sale expertise may be able to expedite the transaction and protect the interests of the buyer. An experienced agent will also be able to see the sale through to completion due to their knowledge of important timelines.
- Thoroughly research the short sale property. Be sure to work closely with a real estate agent or lawyer to review the public records of the property in question before making an offer. This research will allow the potential buyer to learn who is in title, whether a foreclosure notice has been filed, and how much is owed to the lenders. This information is useful in determining how much to offer a seller.
- Have a financial plan in place. It is best to have a financial plan in place when an offer is made on short sale properties. One option to consider is to ask the current lender for a loan. If the buyer is a good credit risk, the lender may be willing to expedite the loan application before a decision on the property is made. The short sale process usually moves quickly once an agreement is reached and the lender may require closing to occur in as few as 20 days. At that point, it will be too late to begin looking for mortgage options.
- Ensure home inspections are conducted. Traditionally, a seller will pay for home protection plans for the buyer, roof, pest, or termite inspections, and pest completions. However, in a short sale, the lender may not allow the seller to pay for those customary items and require a buyer to purchase the property “as is” with no repairs. It is important that potential short sale buyers obtain a home inspection before purchase to allow the potential buyer to make a decision based on all the facts. Work closely with a short sale real estate agent to reserve the right to a home inspection before a purchase agreement is reached.
- Properly submit purchase documents and obtain lender approval. A short sale deal is not reached when the seller accepts the buyer’s offer; the deal is reached when the lender accepts it. Be sure that the offer letter, copy of an earnest money deposit, proof of funds, and a preapproved loan letter is submitted to the lender for approval. When these documents are shared with the lender, ensure the agent has stated that the offer is contingent upon the lender’s acceptance and give them a time frame to respond. This will allow a potential buyer to cancel the transaction if a decision is not reached within the set timeline. However, recognize that even if a purchaser has everything properly lined up and ready to go, the lender may, at the very last minute, decide not to go forward with the sale.
A member of the Markotsis & Lieberman team would be happy to assist buyers in the short sale process. Visit our website to learn more about the options available to buyers during a short sale.
About Markotsis & Lieberman, Esq.: Markotsis & Lieberman, P.C. is a general practice law firm. Practice areas include real estate, litigation (commercial and civil), business formations, agreements and transactions, and wills, trusts and estates. Our team of seasoned attorneys are here to guide you through every step of the legal process providing personalized attention to every client. When you’re facing a complicated legal situation, our team of legal experts is there to fight for your rights.