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How short sales work and are approved

If you want to purchase a short sale property, then you may know that you will have to work with a real-estate attorney in South Carolina by law. There are many questions you may have for your attorney, like if you need a mortgage lender's approval or why the home is being sold for less than it's worth. These questions are worth having explained to you, so you know how the process will proceed. Not having a good talk about the risks before you start this process can be detrimental, so here are a few things to think about.

To start with, short sales happen when a property has to be sold for a lower price than the amount agreed to on the original homeowner's mortgage. That doesn't mean the home's value isn't accurate. For instance, if a home's value drops significantly, then the mortgage could be for a much higher price than the value of the home.

Next, you will need a mortgage lender's approval to purchase a short sale. This is because the property is being sold for less than it owed, so it's the responsibility of the homeowner to get the mortgage lender to agree to your offer.

A homeowner may decide to participate in a short sale to prevent foreclosure or because the mortgage payments are too high. In that case, the benefit to you is a lower price, while the benefit to the mortgage lender is getting at least some of the money back. In a bankruptcy, the mortgage lender could receive much less money or potentially nothing at all for the same home.

Source: Freddie Mac, "Buying a Short Sale Property," accessed Sep. 10, 2015

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