When you buy a home in a short sale, a bank will allow the owner of the home to sell you the property at a discounted rate in order to pay off the existing mortgage. However, just because the home seller accepts your offer, it doesn't necessarily mean that the bank will accept it. Ultimately, the seller will need to qualify for the short sale through the bank before the transaction can be carried out.
There are two common circumstances in a which a home could be short-sold. These include:
- Situations in which the homeowner gets behind on mortgage payments and can't get caught back up again.
- Situations in which the value of a home has fallen below the amount of money that's currently owed on the mortgage.
Before a buyer agrees to purchase a home in a short sale, it's important to do a little bit of researching into public records. For example, you'll want to determine whose name is on the title, whether the bank has filed a foreclosure notice and how much the borrower currently owes to the lender. Knowing this information will help the buyer determine an appropriate amount to offer for the short sale.
An experienced short sale professional who is familiar with Colorado real estate law can be invaluable during the process of researching a particular transaction. Short sales are not the easiest real estate purchase agreements to navigate on one's own. Homebuyers may therefore want to brush up their legal knowledge pertaining to short sales before moving forward with such a large investment.
Source: The Balance, "Before Buying a Short Sale Home," Elizabeth Weintraub, accessed Dec. 28, 2017