Buying a home with negative equity (also known as a short sale) can be a challenge. Many times, the homeowners are behind on their mortgage and trying to sell the house to avoid foreclosure. This can cause the homeowners to do things that are not necessarily in the best interest of the buyer. However, with some research and patience, buying a home with negative equity can mean a substantial savings for the buyer.
Instructions
1. Determine whether the home has bank preapproval for the sale. For a short sale to be completed, not only do the buyer and seller have to agree on a price, the mortgage holder (the bank or mortgage company) has to agree to the terms as well. The mortgage lender is essentially being asked to take a loss on the sale, so when seeking a short sale home, it is safer to go with a home that already has approval from the lender.
2. Be prepared to make a cash offer. Short sales are most successful when the potential buyer has the money on hand to pay the lender. In some cases a preapproval will be sufficient, but it is best to have financing in place before making an offer.
3. Get an inspection. Most short sale homes are sold "as is." so the inspection will not lead to negotiations about repairs to the home. However, an inspection will determine exactly what it is you are getting for your money. Legally, a homeowner is required to list defects when selling a home, so an inspection will also ensure that the seller is being truthful about the condition of the home.
4. Be patient. After a price has been agreed upon, the mortgage holder has to agree to the amount and terms of the new mortgage agreement. This process can take some time, from a few weeks to a few months. Also, the lender may make a counteroffer, and that offer might not be agreeable for the buyer.
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