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Buying a Short Sale Property in Illinois

By Thomas Mitchell

Americans have become more familiar with short sales since the recession, since the amount of them has gone up dramatically. A short sale is when the lender agrees to let the owner sell the home for less than what they owe on their mortgage. They typically occur because the owner wants to get out of the mortgage for whatever reason. Usually to avoid being foreclosed on. Let's look at some basics of buying a short sale property, ironic name and all.

Short sale complications typically stem from the fact that there are so many parties involved, possibly including junior lien-holders (from a second mortgage), and tax lien holders, all of whom must grant approval through each step. As a result, short sales often take longer than 30 days to close, sometimes stretching across several months. Delays can arise due to bank holdups (they may not approve the negotiated sale price) or the extra paperwork involved, mostly for the seller, making it difficult to synchronize moving in to your new home with leaving your current one. When you've ironed out the bulk of the details and just want to move in, this is the part of the process that can cause the most frustration.

Short sale properties may also require some fixing up. With the seller in a tough financial spot, the property may not receive the "sprucing up" that typically happens prior to listing a home for sale. Beyond the sexy price tag, these repairs may be expensive and/or time consuming. Use the home inspection report to gather estimates and determine the true cost of buying the property.

You might also find that the seller had the utilities cut prior to the inspection or final walk-through (remember, they're in a short sale scenario because of financial strains!) and getting the lights back on may be an issue if you haven't closed on the home yet, as some companies may not allow anyone but the current owner to activate utilities.

For a buyer, short sale properties are attractive because of their price tag, but it will require patience and due diligence to acquire one. You'll want to connect with an agent and real estate lawyer who have short sale experience. You know the benefits of having a good agent and lawyer, but short sale transactions present unique challenges. Make sure you partner with professionals who have dealt with them before.

Even if you already have a deal in the works, it doesn't hurt to keep hunting for bargains. If you have a verbal acceptance with the seller, they have to submit the offer to the lender who then has to get insurance to cover the rest of the mortgage debt. Unless this is an approved short sale (which could theoretically close in the traditional 30-60 day window) the process will usually take 2-4 months, and even longer in more extreme cases. If you find another property you can walk away from your first offer.

For a buyer, short sale properties are attractive because of their price tag, but it will require patience and due diligence to acquire one. You'll want to connect with an agent and real estate lawyer who have short sale experience. You know the benefits of having a good agent and lawyer, but short sale transactions present unique challenges. Make sure you partner with professionals who have dealt with them before.

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