Tips to Buying a Short Sale Property

When a homeowner can no longer afford the mortgage payments on a home instead of not paying them for months and allowing a foreclosure to take place, there is an agreement with the bank holding the note to accept less than what is owed on the property. This is called a short sale.

Short sales though are anything but. They tend to take longer than a seller listed property and can add a lot of hoops to jump through. But with these simple steps, you can start the road to short sale buying more informed.

1. Find and locate potential short sales -  You can use our online database, search courthouse listings and legal ads or use an experienced real-estate agent as a buyer's agent. You will want to know how much the home is worth and how much it's being sold for to determine if it's a wise investment.

2. Check out the property in person - Look at its condition and come up with a rough estimate of how much it's going to take to repair or renovate. If you are looking for something that needs repair to boost equity you may be able to steer off other buyers that want it live in ready.

3. Research the property - What is the property worth? What's the profit potential? Make sure this is worth your time and investment whether or not you plan on living in the home.

4. Be aware of all existing mortgages and liens - Ask the seller or his agent what liens are on the property, and which lender is the primary lien holder.

5. Work out your financing -   If you plan on getting a loan, the existing lender may be willing to give you a loan if you have good credit. Since the lender already has a lot of your information in the short-sale paperwork, it may be able to expedite the loan application process.

6. View and complete the short sale agreement - Each lender has their own set of paperwork to fill out and file.

7. Prepare all the documents and present to the bank - Your buyer's agent can be able to help in this area but these documents should include:

• The purchase and sale contract, signed by you and the seller, to buy the property for a specified price.
• A hardship letter.It's important to remember a lender will not even discuss a short sale until the homeowner has fallen behind on payments.  To make this case, start with a letter written by the seller giving an overview of their desperate situation.  Have the seller supply as much evidence and documentation as possible, such as divorce papers, evidence of job loss, delinquent accounts, utility shut-off notices, car repossession paperwork, last two years' tax returns, recent pay stubs and recent bank statements.
• A statement of the property's value.This can be an appraisal or a broker's price opinion. It's better if it shows the damage to the home, a low value and repairs or replacements the bank will need to recoup the loss. The lender doesn't want to spend the time repairing the home so the better your offer looks, the more likely it is to be accepted.
• A settlement statement. This statement, which can be prepared by a closing agent gives an overview of the purchase price, the closing costs and any other costs or fees involved in the transfer of the property.

8. Negotiate and close the deal - Once you've reached an agreement with all three parties; you, the seller and the lender; get everything in writing and officially recorded. Make sure the seller understands all of the terms of the deal. Next comes the closing and the property is yours.

This is a complicated process but usually one well worth it in the end. You can typically get a better deal on a home and if you plan on remodeling anyway, this is a great way to cash in on an investment. For a list of short sales in the Clarksville TN real estate area, please contact us anytime!