What are the steps for buying a Short sale?

[urbanartist]

In about a year or so we will be ready to buy. There are a lot of posts about buying Short Sale Houses and Foreclosed houses, but everyone seems to be connected to real estate. What are the steps needed for regular people to try and purchase a house under those conditions? The other posts I've read suggest that banks are less than helpful and many auctions for foreclosed homes are hard to navigate.

[ira s]

1. You don't want to buy a foreclosure at the auction because you are not allowed to enter the property beforehand and you are either required to pay all cash or make an arrangement with one of those foreclosure loan sharks. You can get a good deal there like my next door neighbor did, but it's way too much of a crapshoot.

2. Short sales require patience. Often, the seller has already received the notice to foreclose, and you'll be in a bit of a time bind to get it done before that happens, but there are deals out there. Sometimes, an unscrupulous listing agent will price the house way too low in order to attract higher offers, but also way too low for the lender to approve the deal. Some listing agents have no experience with short sales and they're going to blow it, so I think it's more important that the listing agent have extensive short sale experience than the buyer's agent. However you'll be represented in a short sale deal ( an agent, an attorney, whatever), you'll want to find out both the listing agent's experience with short sales, and get a comparative market analysis or get an appraisal. Rumor has it that the lenders will not approve anything less than 78% of current market value, so if you find a house and determine that it's worth 500,000 dollars, but it's listed at 200,000, then either the lender will never approve it, or the listing agent is trying to pull a fast one and elicit a bidding war, or the house has some very major problems. Short sales can take a very, very long time to close.

3. Bank owned, or REO properties, is the easiest way to go. Most of them are listed and available to go into. In most cases if you offer the full asking price it will be accepted. Once the offer is accepted by the seller( the bank), closing usually is almost as fast as a regular deal.