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How to Buy Short Sales in Portland
Learn about buying short sales in Portland Oregon
When I started helping people buy and sell real estate in 1987 we never heard of a short sale. Property owners who couldn’t make their mortgage payments were foreclosed upon by the lender. That was it.
In these difficult financial times it can cost a lender less in the long run to take less money than owed (go short) than taking the house back in a foreclosure. I do so look forward to the day where there are no more short sales and I can take this page off my web site.
Definition of a short sale (also called a pre-foreclosure):
- A home is sold for less than is owed on the property
- The seller doesn’t have other money to pay the difference to the lender(s), and
- Those lenders agree to accept less than is owed on the property
Hardship requirement:
Often lenders require there to be some hardship of the seller that they cannot keep the property and cannot sell it for enough money to fully pay off the loans.
Foreclosure vs Short Sale
In a short sale the buyer purchases from the seller/owner of the property with the seller’s lender’s approval to take less money than the lender is owed. In a Foreclosure the buyer purchases from the lender who has foreclosed on the property and now owns it. Homeowners often try to have a short sale in order to avoid foreclosure.
Short sales offer buyers some of the best home pricing in today’s market. But there are hazards to trying to buy a short sale property.
A short sale purchase may be right for you if:
You have lots of time and no firm deadline for when you need to move in. Once you’ve had your offer accepted by the seller, the lender needs to approve the purchase. This can take around two months if there is only one lender and four or more months if there is more than one lender involved.
Your financing is in order. Cash is always the best way to make your short sale purchase. Most people don’t have all cash. The Seller’s lender will look more favorably on pre-approved buyers with a good size down payment (15-20% or more of sales price) than buyers with smaller down payments or who have not been pre-approved.
You can make a non-contingent offer. If you have a house to sell yourself or have other requirements for the sale—like a specific closing date, lenders are less likely to accept your offer to purchase a short sale property.
Pitfalls for Buyer Making Offers on Short Sale Homes:
Rejected offers. Lenders often receive multiple short sale offers and pick the one they like best to accept or to counter. It can take a long time to find out if your offer is accepted. If you make an extremely low offer on a house, your offer may be rejected after months of waiting.
Bad terms. Even if the lender agrees to the offer, the sale may not go ahead. Often the lender requires the seller to pay back the “short” portion of the loan at a later date. If the seller refuses, the transaction fails—possibly after months of waiting.
As is. Most short sale purchases involve no repairs being done by sellers (who may have no funds) and lenders who receive less than they are owed. If you get a good deal on the short sale purchase, that may have to be enough.
Short Sale Facts
- Six in ten short sale offers approved by the lender do not close. Either the buyer walks from the transaction or the seller refuses to agree to remain liable for the lender’s deficit.
- Over all, lenders tend to accept 10% off current value but not more than that.
- For buyers with patience, time and nerves of steel a short sale can be the way to purchase at the lowest prices of the market.
(Courtesy of the National Association of Realtors)
Do you have short sale questions?
Ask me. I’ll get you the answer.
