Derek Morgan
Derek Morgan
Other Condo Real Estate
Derek Morgan
Derek Morgan
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What is a Short Sale Condo?

A short sale in real estate is when one sells a property for less than the amount that they owed on their mortgage. This is frequently a sign of financial distress and may be the last resort before foreclosure. The lender typically approves the sale before it occurs and the proceeds go to the lender. The lender then has two options: forgive the remaining balance or pursue a deficiency judgment, which would require the former homeowner to pay all or part of the difference.

Definition of a Short Sale

Short sales are often drawn-out, paperwork-intensive transactions and can take up to a year to process. Fortunately, they are not as detrimental to credit ratings as foreclosures. It's important for homeowners to be aware of this beforehand, as any type of property sale denoted by credit companies as "not paid as agreed" will negatively impact credit scores.

The process of completing a short sale involves convincing your lender that you're financially distressed because of unforeseen circumstances such as health problems, job loss, or divorce. Before beginning this process, struggling homeowners should consider how likely it is that their lender will agree to work with them on a short sale since they are not required to cooperate.

How Short is a Short Sale Condo?

To gain lender approval for a short sale condo, patience is required. Negotiations with a lender can call for a few weeks, or even several months. A distressed homeowner generally gets to stay in the home during the short sale process. Homeowners who go through a short sale may be eligible to purchase another home immediately, with certain restrictions. Buyers who are flexible with timing are usually well-suited to be successful in a short sale condo. Research and communication are key … along with loads of patience!

The COA’s Part in a Short Sale

Both the Condo Owner’s Association (or COA) & mortgage lender will require an appraisal. The COA will have to sign off on a short sale deal in some instances, meaning another layer of red tape to go through in addition to the seller’s lender. The most common reason that a COA would deny short sale approval is for delinquent COA dues. If the seller hasn’t been paying their dues, the COA may have already taken out a lien on the property. As a buyer, you’ll want to make sure you’re comfortable with the COA before entering the short sale proceedings. Ask your real estate agent or legal advisor early on if COA approval is necessary for this deal since regulations differ by locale.

Working with experienced professionals can be the key to streamlining the process. Make sure that your real estate agent has dealt with condo short sales before. Your agent should be able to construct a deal where you can walk away if necessary.

Making an Offer on a Short Sale

Because the transaction is in the hands of the lender, short sales are more complicated than traditional home sales. Before making an offer on a short sale, gain all the information you can about the property. Real estate agents and title companies are excellent resources for this.

We recommend keeping your offer close to market value if you want it to be accepted. Short sale properties are sold “as-is,” so make sure you get a home inspection before closing on one. 

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Tips for Buying a Short Sale Condo

Purchasing a short sale condo can be a smart way to get a fantastic deal on a property, but you don't want to go in on one blindly. While we recommend consulting with a real estate attorney or agent, here are a few extra tips for a successful short sale condo purchase.

Be Ready to Act Quickly

The process of a short sale can move quickly. Therefore, you'll need to be able to make decisions swiftly and comfortably or this type of sale may be off the table. Secure your finances ahead of time and have a certain amount of money set aside for the purchase, or a pre-approval letter from a lender. Having these things in order before you start looking for a short sale condo will make the process much smoother.

Understand the Laws and Regulations

Every state has different laws and regulations, so understanding your state's specifics is huge. Likewise, comprehending the rules of the COA is crucial, as some COAs must approve the sale before it can go through in some states. Make sure you understand the tax implications that you might be liable for before you make an offer.

Negotiate Aggressively

When negotiating for a short sale condo, it's important to be aggressive. Even though the seller has lots of power in this type of sale, you should aim to get the best deal possible. Don't be afraid to make a low offer to test if the seller is willing to negotiate.

Be Flexible

Short sale transactions can be unpredictable, so preparing for changes is important. Don't expect everything to go according to plan, so stay in communication with the seller and the lender. While short sale transactions can be stressful, stay positive by remembering that you are getting a great deal.

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Final Advice and Conclusion

Be aware that the property may need some work before it is move-in ready. Buyers should be prepared to invest in repairs or renovations in order to make the property livable. This can be a great way to add value to the property, but it can also be a significant expense. There are potential risks when strategizing to turn a profit off the sale associated with market fluctuations. While the value of the property may increase, it is also possible that the market could decline, leaving the buyer with a property that is worth less than what they paid for it.

With the right preparation, understanding of the process, and a little bit of patience, you can get the condo of your dreams. We hope you've found this post informative and helpful. As always, the team at Unreal Estate is here to help you navigate the world of commercial real estate with confidence. If you have any further questions, don't hesitate to reach out to us or follow our blog for more tips and tricks on managing real estate.

We'd love to hear your thoughts about this article and our blog. Let us know how we did by completing the Unreal Estate Blog Feedback Survey.

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