Short sale?

Question

I found a condo I like but it's a short sale. What does that mean to me the buyer? Is this a bad idea? I have great credit and a down payment. I just happen to like the location of the condo and the condo itself. I dont want to get into something bad. If the seller/lender sells a condo at less than market. Do end up paying that? Totally confused here....please help. Thanks

Answer 1

The Seller of the condo paid borrowed more to purchase the condo than he/she can sell it for - hence in selling the condo he/she is short in the money it will take to pay off the existing loan - "short sale".

The biggest hassle you face is getting an answer from the bank as to how much less than what they are owed they will take for the purchase.  Added to the problem is that this is so prevalent that lenders are taking a long time to decide whether to take an offer or not, probably because they're understaffed.  Ask the seller's agent if he/she's discussed what the bank will take for the property.  If there is a number, decide if that's what you're willing to pay and the deal should go through pretty quickly.

You should also get PREAPPROVED, which means that the lender has already reviewed you as a buyer and said yes.  This means that the bank has a very serious buyer that they are dealing with and that the deal has a high probability of going through.  Also, you are very clear about how much you will be paying every month.

Make sure that you know what your principal, interest, taxes, insurance and home owner's fees will add up to every month.  Go in knowing what you're committing yourself to and you should be fine.

Answer 2

What this means is the lender will sell the condo to a new borrower, you, for less than what the current mortgage owed is by the current owner, the seller. The lender is being flexible because they do not want the property to go into foreclosure and lose potentially more. This is a situation where EVERYONE benefits: you get the house for a cheaper price, the lender does not have to report yet another foreclosure to their investors and hold the borrower, the seller, responsible  for court filing fees etc, and the seller gets out of the house with minimal damage to their credit. The difference between what the seller owes and what you pay the lender will forgive, and have the irs send the seller a 1099 form next year, which they will be responsible for just the taxes of that total amount.

Answer 3

A short sale means the owner owes more than the market value - it doesn't mean you will pay less than market value. The definition of market value is what a buyer is willing to offer and a seller is willing to take. Since a lender will be involved in the decision and taking a financial hit, they are not going to give away any more than they have to.

As a buyer, you can expect a short sale to take longer, you will have very little leverage to negotiate repairs, etc., and until you remove contingencies, the seller and lender can continue to receive and accept better offers (at least in California).

Short sales can be relatively trouble-free with the right set of conditions including proficient agents with good lines of communication into the bank, but if you read the questions here with any regularity, you'll see lots of questions from frustrated buyers who aren't getting answers from their agent, the listing agent or anyone else involved in the short sale transaction. Pick a good agent, make sure there's a good agent on the listing side, and don't get too emotionally involved until the deal is done. Good luck!

Answer 4

a short sale is when the current lender is okay with selling the condo for less then the amount owed on the loan.  

one important thing it will mean is that the lender will likely take a long time to responding to your offer, much more time then a typical seller will.  (i'm sure the exact time depends on the lender but i've heard stories of 3-4 week response times these days)