Short Sale Information for Home Buyers

A real estate short sale is when the property owner owes more than the property's current market value but the owner has a hardship and needs to sell. In a typical (non hardship) situation, the mortgage lender(s) will require the homeowner to deposit the difference in the amount owed to the escrow company to facilitate the closing.

A real estate short sale is where the seller’s real estate agent and/or attorney negotiates with the lender(s) to accept a pay-off that is less than the mortgage balance and the homeowner does not to pay the difference (nor bring any funds into escrow).

We have prepared a list of all Orange County Short Sale properties currently in the Realtor MLS. CLICK HERE for a list of Short Sale Listings. The listings are updated hourly.

What is the benefit of Buying a Real Estate Short Sale?

Buying a property which is listed as a “short sale” can be a very lengthy process with no guarantee of success, so a “Low Price” is the main reason most home buyers are willing to purchase a short sale home. However, another benefit of buying a short sale property is the ability “to buy a particular house” that is very unique or special. Certainly there are special houses which are worth the extra effort.

Will the price be lower on a short sale property?

Yes, most of the time we see short sale properties selling at prices which are lower than standard private party sales. Sometimes we see short sale properties sell for close to full market value… it depends on the desirability of the home and the inventory of available similar properties. The sale price of short sale properties must be approved by the property owner’s lender. The lender will hire one (or more) appraisers to ascertain the market value of the property. If they feel the buyer’s offer is adequate, they will approve the sale… if not they may counter the offer and request a higher price and a reduction in the seller’s closing costs. In some circumstances the buyer may be asked to pay a cost which is normally paid by the seller including past due HOA fees, taxes, & other closing costs. Occasionally buyers walk away from short sale transactions due to the price demanded by the short sale lender. And, sometimes a very low price is approved by the short sale lender.

How long will it take before the short sale is approved, and the escrow closed?

Many banks have “geared up” for short sales and the process is moving along much more quickly than in years past. If the seller provides all the necessary documentation up front, the seller’s agent is diligent in follow-up, and the short sale lender is not overly backed up with files, it is possible to get a full short sale approval in as little as 60 days. Thereafter, the escrow is 30 days (or less if the buyer is ready to close). However, it should be understood that there are a lot of short sales which take much longer to get approved, and some short sales are “never” approved.

What type of buyers should NOT purchase a short sale property?

Short sales take time, and there is simply no guarantee that the offer will be approved. The bank may ignore the offer for months and simply foreclose on the property. It is completely the prerogative of the property lender… sometimes they approve the short sale and sometimes they do not. Short Sales are typically sold in their present “as-is” condition. The seller may stop maintaining the landscaping, pool/spa, and other systems in the house. There may be additional disclosed or undisclosed deferred maintenance. Also, short sale lenders will not consider offers which are contingent upon the sale of another home.

•Anyone who must close the sale by a “certain date” should not get involved in a short sale.
•Anyone who is not willing to do “fix-up” work should not purchase a short sale.
•Anyone who must sell another home before buying is not attempt to purchase a short sale.

How can I find out about available short sale properties?

We have prepared a list of all Orange County Short Sale properties currently in the Realtor MLS. CLICK HERE for a list of Short Sale Listings. The listings are updated hourly.

If I find a short sale property I want to buy, what next?

If you find a short sale property you want to buy, the next step is to Contact Us. First we will research the property and discuss the circumstances of the seller’s hardship with the listing agent to gauge whether a short sale is possible for the property. Then we will report back to you our findings and prepare the offer forms in such as way as to maximize the probability your offer will be approved by the seller (and the seller’s lender).

Note: Our commission is paid by the seller. It does not cost you anything to make an offer on a short sale property (other than some time).

What else should I know about short sale properties?

Since there is no guarantee your offer will be approved on a short sale property, do not fall in love with any short sale home. Keep shopping and watching for other properties which meet your needs… there may be something better and you might miss it if you are 100% focused on one particular short sale property.



Print This Page |

Scot Campbell

Mr. Campbell is the President and Managing Broker of Coldwell Banker - Campbell Realtors in Huntington Beach, CA, and he has brokered over 1,000 homes. Mr. Campbell received his Bachelor of Arts Degree in Real Estate finance, and did his Graduate Studies in Real Estate Economics both at California State University, Fullerton. Mr. Campbell has been licensed in real estate since 1986, obtained his broker’s license in 1990, and was one of the first to pass the State of California Certified Residential Real Estate Appraiser’s exam in 1992. Mr. Campbell has a 100% customer satisfaction philosophy and more than half of his business is from repeat & referrals.
More...