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In a short sale, a homeowner’s lender agrees to accept less for the property than is owed on the mortgage.   It’s a useful alternative for borrowers who owe more than the market value and who can document a hardship.  The home is sold pre-foreclosure.  The lender may be willing to take less than is owed in order to avoid the further expenses of foreclosing and taking over the property.   Are the savings worth it to the buyer?

Short Sales Take time:   As a buyer, you will wait without being privy to the details as the deal is progressing.  Short sales can take a while, usually a minimum of two months, perhaps longer, to get a response.  The lender will review the seller's financial hardship documents and determine market value on the property.  Usually an appraisal is ordered.  If there are two loans, both lenders must agree on how much each will receive.  This takes additional time.

Banks Will Deal Within Reason:  A short sale is a distressed sale and, if priced appropriately, could be attractive.  A buyer needs to make a fair offer, based on comparable sales.  A short sale is often sold for less than a traditional sale.

Sales Are “as is:”   With a short sale, the owner will not make repairs as in a traditional sale.  A home inspection is recommended.  Know the condition and be prepared to accept the home as you find it. 

Have a Back-up Plan:  Even if you decide to bid on a short-sale, it might be best to keep looking.  Escrow does not begin until the lender approves the price at which they will sell the home.  This price may or may not be what was offered. 

It isn't Only about Price:  Buy a house you like.  Make sure you buy a home you want to live in.  Don't be drawn in by the price.  A short sale is only a bargain if it’s a home that you will truly be comfortable in.