A short sale is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Investors interested in a short sale must be aware of the following:
– The sale may not close on the contract price. Sometimes there are more than one lien holder on the property and each and every lien holder has to release the lien for the sale to complete. Sometimes the lender may not approve the sale because debts exceed the sales proceeds by more than what the lender is willing to accept. It is possible that after months of waiting, the lender requests that you pay a price higher than the contract price. When a short sale falls apart, the buy will have wasted the money he or she already spent on home inspection and mortgage application, etc. This is something that investors interested in short sale properties should be prepared for.
– Short sale is a lengthy process and takes a lot longer than a regular real estate transaction. Typically it takes three to four months, possibly up to six months, from the time the contract is signed to close the sale. If the buyer plans to take a home mortgage loan for the purchase, it is important to specify in the contract
– Can I withdraw from the transaction after I have signed the contract of sale?
Yes. If you change your mind or find a better deal during the waiting period or after lender approval, we can cancel the contract and request refund of your earnest deposit on your behalf. Because an AS-IS contract is usually used for a short sale, we can include a contingency clause for home inspection.