Buying Short Sale Homes Purchase For First Time Home Buyers


Buying Short Sale Homes Purchase For First Time Home Buyers

This BLOG On Buying Short Sale Homes Purchase For First Time Home Buyers Was Written By Alexander Thomas Carlucci of Gustan Cho Associates

Home buyers will run into situations when during their home shopping process where they will run into a home that is a short sale home:

  • The homeowner is technically the owner of record
  • The homeowner got approval by their lender to sell their home below a price
  • It is lower than the mortgage loan balance
  • Buying short sale home is not always a good idea
  • This because most short sale homes take substantially longer to close than traditional closings
  • This is due because the homeowner needs to seek the permission of the homeowner’s lender throughout the real estate closing process

Buying Short Sale Homes Process And How It Works

A short sale is when a homeowner has a property that is worth less than the amount of their mortgage loan balance:

  • Needs lender’s approval to sell it at market value which is normally below the mortgage balance
  • For example, here is a case study:
    • if a homeowner owns a home that is worth $300,000
    • they have a balance of $400,000
    • they would need to come up with $100,000 out of pocket in order for them to be able to sell their home
    • However, with a short sale, the homeowner gets their lender’s blessing to be able to sell their home for 300,000
    • their lender will forgive the $100,000 debt
    • the lender will write off the $100,000 deficit and not sue or go after the homeowner for the shortage

Who Hires The Listing Realtor On A Short Sale Listing

When a homeowner gets approval from their current lender and gets approval for a short sale, the homeowner gets to choose the listing real estate agent.

  • The lender needs to approve the listing price of the home
  • Whenever there is an offer on the home, the homeowner needs to submit that offer to their lender for them to approve
  • The homeowners lender is the seller that signs off on the real estate purchase contract and final price
  • Whenever a prospective home buyer submits a real estate purchase offer, it will take some time for them to get a counter offer by the lender
  • Buying short sale homes can take quite some time
  • Most lenders take their sweet time in getting back to the home buyer’s offer
  • The biggest disadvantage with buying short sale homes is the slowness of the lender responding back
  • It may take as soon as four months to close on a short sale property
  • Other times it can take longer than six months
  • Buying short sale homes takes patience and time
  • Also, since the seller is actually the bank or mortgage company that holds the note on the property, many times lenders is not wiling to negotiate too much
  • Often times sellers concessions is not given to home buyers buying short sale homes
  • Many lenders also do not give extensions for closing delays

Home buyers needs to understand that buying short sale homes is not always a deal. Lenders are not stupid and will do their due diligence prior to accepting an offer by buyers. Borrowers who need to qualify for mortgage with a direct lender with no overlays on government and conventional loans should contact Alex Carlucci of Gustan Cho Associates Mortgage Group. Alex Carlucci is available at 630-915-7550 or text him for faster response. Alexander Carlucci has zero overlays on government and conventional loans.

1 Comment
  1. Gustan Cho, NMLS 873293 says

    Many home buyers think that they are getting a deal when buying a short sale home. This is normally not the case. Banks always want the fair market value and are in no hurry to sell below market value.

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