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/media/Images/Item /%Short sales become more common in a bad economy. They occur when a homeowner can’t keep up with his mortgage payments, so his lender agrees to let him sell his home for fair market value, even if the value is less than the mortgage balance he owes. The alternative is for the lender to foreclose, which takes time and money. With a short sale, the lender can usually recoup its mortgage balance relatively quickly.

You’ll Probably Pay Less

Because you’re buying the property at its fair market value — typically in a depressed real estate market — you’ll pay less in a short sale than you would if the homeowner listed the home at a price sufficient to cover his mortgage. When the market rebounds, you can typically sell the property for a good profit. In exchange for this, however, there are usually a few catches and possible drawbacks.

You’re Buying As-Is

A short sale homeowner is in financial distress. If he can’t make his mortgage payments, it’s not likely that he has money to maintain the home in good condition either. When you buy a short sale home, neither the mortgage lender nor the homeowner will typically make any necessary repairs. You get the home as-is, complete with any problems the homeowner was unable to fix. Therefore, even if you purchase the home for a rock bottom price, you’ll most likely have to invest some in fixing it up.

The Lender and the Seller Must Agree

Both the mortgage lender and the homeowner must agree to your short sale offer. The lender must accept less for the home than the mortgage balance, and some lenders want to hold the homeowner financially liable for the difference between the sales price and the mortgage balance. If the homeowner doesn’t agree to this provision, the lender can’t proceed with the sale without his approval. However, lenders will sometimes forgive the difference and write it off, giving the homeowner some incentive to agree to the short sale.

Short Sales Aren’t Speedy Transactions

Short sales typically take longer than traditional sales. The lender will want to have the home appraised, and it will also take time to consider the pros and cons of your offer. It might make a counteroffer to the price you initially propose. It’s possible for a short sale to drag out for months, particularly if more than one lender has a lien against the property. In this case, all lenders must agree to the short sale.

A Real Estate Lawyer Can Help

The law surrounding short sales is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a real estate lawyer.