Q: What is a short sale?
A: A short sale means that the seller owes more on the property than they can sell it for in the current market. Because of this, they need to get special approval from their mortgage holder to take a loss on the property when it sells because they won’t be paying back their full mortgage. This process can take a couple of months and up to a year, depending on how many lenders are involved and which banks they are.
Q: Is a short sale the same as a bank-owned home?
A: A short sale and a bank-owned home are two very different things. In a short sale, the seller still owns the property, and they are going through the process of getting the short sale approved through their mortgage company. In the situation of a bank-owned property, the bank has already taken the property back from the seller so you’re working directly with the bank. There is no approval process required for a bank-owned home, so you can close much more quickly.
Q: Do I have to pay short sale negotiation fees as a buyer?
A: Many sellers will hire a short sale negotiator when they’re going through the short sale process. That negotiator works on their behalf and deals directly with their mortgage company so that the seller doesn’t have to. Hiring a negotiator is beneficial to both the buyer and the seller because they work specifically on short sale transactions, so they know what it takes to get the approvals done and can help things move more quickly.
Oftentimes the negotiator will charge a fee that is sometimes paid by the buyer. Every once in awhile, the seller will pay it but more often than not, that fee does get transferred to the buyer.
Q: If problems are found during my inspection on a short sale, will the seller fix them?
A: When you are purchasing a short sale, you can definitely still have an inspection which is, of course, recommended. The difference here is that typically the seller doesn’t have any money to make repairs on your behalf. When you are doing your inspection on a short sale, you probably have already received the short sale approval letter, so negotiating credits for inspection items is a lot more difficult. The point of doing an inspection on a short sale home is to make sure that you are comfortable purchasing the property in as-is condition.