Learning about short sales

[Curtis Daniels]

I looked at a house that I saw was selling for $25,000 as mentioned by Zillow. My girlfriend wanted to know more about the house, so we drove by and took a look. The home had no agent's sign in the front yard. By our serendipitous luck, we found out that the back door was open. The home definitely looked like it needed improvements.

A few days later (today), I called the agent listed on Zillow, and she told me that there's a bunch of people asking about it and that the house is under contract. She told me that it was a short sale home. When I asked her what steps I should take, she told me to talk to a lender, get pre-approved, and then start looking at the house.

If you all could help me out, there's a non exclusive list of things I would want to know about shortales and this situtation.

1.) What really is a shortsale and why is the house under contract?

2.) What do you think about us getting pre-approved in this situation?

3.) I also wanted to ask her if I personally could buy the house with ALL CASH as is. Do you think I should call the agent back up about this? Do you think she would be more receptive to me?

Thanks
CJ Daniels

[Jon Holdman]

A short sale is a situation where the selling price of the house doesn't generate enough money to pay off the mortgage. The lender agrees to the "short sale", which means they will accept less than the full payoff.

If you're going to finance the purchase, getting pre-approved is a necessary step to buying house, regardless of the details of the house.

If you have cash, then you don't need the pre-approval. What you need instead is your bank statement showing you have the cash in the bank. Yes, cash offers are really strong, if they're real.

If this house is already under contract, you could put in a backup offer. Many times with short sales there's a bunch of negotiation going on between the seller and a buyer and the lender. Then, the lender requires them to put it on the MLS. It goes onto the MLS, but then immediately goes under contract. So, it looks like its for sale, but in reality its already sold.

Short sales are a pain even with cash. The seller's acceptance of your offer is a necessary step, but it doesn't really mean squat. What matters is the lender approving the short. That can take weeks or months and may never happen. REOs, too, can be tough to buy. If you're looking at these types of properties, be prepared to make a LOT of offers. DO NOT fall in love with any particular house.