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That depends.  Short sales are definitely a “different animal” than normal resale or new construction listings, and it’s important that you are prepared for the process.

Let’s begin with “What is a Short Sale?”  Lenders that loan money secured by a lien againstshort sale real estate have a right to require that loan to be paid in full before they release the lien, which is typically paid out of the proceeds of a sale of the property.  A “short sale” then is a sale where the proceeds (the sales price) is insufficient to pay the loan in full, and the lender agrees to release the lien for less than the full payoff of the loan.  Lenders might agree to do this when the seller must sell the house (hardship or otherwise) or foreclosure is imminent or likely, and the current value of the house does not support a sales price high enough to pay the loan in full.

So, what are the disadvantages to the buyer of a short sale purchase?  First of all, since lenders are not obligated to agree to accept less than the full amount necessary to pay their loan, there is always a chance that the deal will fall through at the last minute.  That uncertainty is not something that all buyers are willing to deal with.

The second major downside to purchasing a short sale is that there is little to no control over timing, again because you are waiting for the lender to approve the contract.  Do not make firm plans (hiring movers, switching schools, etc.) until you have confirmation that the bank has approved the short sale.

The process can take anywhere from two weeks to six months (but normally falls in the 60-90 day range).  It depends entirely on the lender and the particular requirements associated with your transaction.  Because there is no way to predict how long it may take, short sales are not a wise option for buyers who need a firm commitment on a closing date (due to shipment of household goods, or existing lease termination, etc.).

It is important to work with a REALTOR who is familiar with, and has expertise in, the short sale process.  There are many things that can be done to protect your interest.  If you are interested in further exploring short sales, please let us know and we'd be happy to connect you with an agent who can help you.

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Post by Lynnette Tully