Short Sale Killers and Pitfalls

3 min read

There are many roadblocks that can derail a short sale. With some extra research, a buyer should be able to uncover the possible obstacles ahead of time and plan for them.

Keep the following pitfalls in mind before you commit to a short sale transaction:

• The short sale process can take more time than a traditional retail sale, and it may be difficult to pin down a firm closing date until the seller's mortgage lender (or lenders) agrees to the short sale. Junior-lien holders such as second mortgages, HELOC lenders, and other special-assessment liens may also need to approve the sale. If a buyer is bound by a specific timetable, a short sale may not be the ideal route.
• You are buying the property on an "as is" basis.
• The seller will normally have to pay some money at closing, or agree to an unsecured debt, in order to have the short sale approved. If the seller refuses, the short sale may fall through even after it was otherwise approved.
• The approving lender will rarely agree to pay for the extras a typical seller might cover. This can mean higher closing costs for the buyer, who will need to shoulder them. For example, the buyer often covers the cost of inspections and repairs.