A home for sale that is reffered to as a “Short Sale” is simply a home for sale that is “under water”. This means there is more owed against the home than it is worth.
A short sale seller has recognized that their home is underwater and has pre-negotiated or started negotiations with the bank to allow a sale despite the fact the bank will likely not be entirely paid off at the time of the sale. Depending on the scenario, the seller pledges to make up the difference out of other assets or the bank actually foregives the difference between the sale price and what is owed against the property.
In almost all cases the bank will have to approve a short sale purchase agreement. Banks are not always the quickest to respond to purchase agreements. It can take 60 to 90 days to approve a short sale. I often hear of short sale closing dates being pushed back and pushed back due to slow bank approval. This should not necessarily detere you from bidding on a short sale but you should think about your position as a buyer.
Are you an investor? Is this your second home? Would it be okay if you had to live in an apartment or with relatives after the sale of your current home closed and before the purchase of your short sale closed? Can you wait to put your current home on the market until your short sale purchase is closed or approved? Are you not worried about “locking” in an interest rate with a lender? If your answer is yes to some of these questions it may be okay to be on the bank’s time line. But, if for example you cannot afford or do not want to be in the position of waiting on the bank, a short sale might not be the best option.
Bottom line, there are great deals out there in today’s market if you are a careful, well informed buyer. If you are looking to buy real estate, short sale or not, I always suggest you consult an attorney licensed to practice in your geographic area. I would also sugest you watch My General Counselor for future postings on matters relating to buying and selling real estate.