1. Property may be foreclosed upon prior to settlement, in which case the buyer's contract is void (although the buyer will get his or her deposit back).
2. Approval of the short sale by the seller's lender may take several weeks or months.
3. Lenders usually don't approve a short sale unless the seller proves he or she is incapable of paying the full amount of the loan balance due to illness, relocation, unemployment or some other hardship. The fact that the property has declined in value is not sufficient for the lender to approve the short sale.
4. Lender may approve short sale only if the seller agrees to sign a new promissory note agreeing to pay the remaining amount due on the mortgage over a specified number of years; if the seller refuses, the buyer's contract is void (although the buyer will get his or her deposit back).
5. If the seller's mortgage is insured, the mortgage insurance company may have additional requirements for approval of the short sale, which may take additional weeks or months.
6. Even if the seller's lender approves the short sale, the seller may not have any money to pay for repairs of defects that are found on the home inspection, or that arise after that and before the settlement. Seller may not have money to pay overdue amounts of condo fees or homeowner association fees; often the lender will not pay these either, so the buyer may have to pay them even if not part of the original contract to buy the home.
7. Buyer may have locked in a mortgage rate for x days, but the seller's lender takes longer to approve the sale, in which case the interest rate on the buyer's mortgage may have gone up.
2. Approval of the short sale by the seller's lender may take several weeks or months.
3. Lenders usually don't approve a short sale unless the seller proves he or she is incapable of paying the full amount of the loan balance due to illness, relocation, unemployment or some other hardship. The fact that the property has declined in value is not sufficient for the lender to approve the short sale.
4. Lender may approve short sale only if the seller agrees to sign a new promissory note agreeing to pay the remaining amount due on the mortgage over a specified number of years; if the seller refuses, the buyer's contract is void (although the buyer will get his or her deposit back).
5. If the seller's mortgage is insured, the mortgage insurance company may have additional requirements for approval of the short sale, which may take additional weeks or months.
6. Even if the seller's lender approves the short sale, the seller may not have any money to pay for repairs of defects that are found on the home inspection, or that arise after that and before the settlement. Seller may not have money to pay overdue amounts of condo fees or homeowner association fees; often the lender will not pay these either, so the buyer may have to pay them even if not part of the original contract to buy the home.
7. Buyer may have locked in a mortgage rate for x days, but the seller's lender takes longer to approve the sale, in which case the interest rate on the buyer's mortgage may have gone up.
Plan on waiting 3-6 months for the bank to approve/reply/deny. During that 6 months or more, you need to move forward with the sale, inspections having an appraisal, ( around 500) secure a loan from your lender ( around 80.00 application fee) You still could go to the closing table and be out all this $ for nothing because the seller ( bank or owner ) could refuse to sign.
Usually even though I have listed short sales I caution people buying their first home like this.
some times you get through all this process.. which is a pain even buying a normal home, and then you lose out on good homes that are on the market, because you can not get out of the contract once the seller signs you have to wait for the bank to make a decision or you lose your earnest money. I doubt you have thousands of dollars to lose, so please Think about all this.
