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Buying a Short Sale: Is It Worth It? (And Does It Really Take Six Months?)

Many U.S. real estate markets are flooded with short sales and, according to the National Association of Realtors, that number is only expected to increase in the near future. So if you’re in the market for a new home, there’s a good possibility that you’ll fall in love with a home that’s listed as a short sale.

If you’re considering bidding on a short sale, here’s some basic information you should know.


A short sale is a real estate transaction where the owner’s lender or lenders agree to accept a purchase offer of a new buyer, short of what is owed by the original owner.

For example, if a homeowner has a loan of $175,000 but the property is only worth $100,000, the lender may be willing to accept $100,000 from a new buyer. Because participating in a short sale rather than foreclosing on the home saves lenders money, some banks have even created streamline processes to make short sales faster and easier.


In a short sale, the seller’s agent lists the property for sale and collects the seller’s “hardship package” including bank statements, loan information, and a hardship letter explaining why he or she had to do a short sale. Then, when you as a buyer put an offer in to buy a short sale, the agent submits that offer, along with the hardship package to the lenders and the negotiation process starts.

One of the biggest challenges is getting multiple lenders to participate in the short sale. Even though junior lien holders would get wiped out if the home were to be foreclosed on, they often require monetary contributions to release the lien. This can also lengthen the negotiation process. 


You’ve probably heard horror stories of buyers waiting six months or more to find out if their offer on a short sale is accepted, and then getting a counter-offer at a price much higher than they can afford to pay. While a rare handful of lenders can accept short sale offers within a month or two, acceptance can typically take four to six months, or even longer.

And when there are junior lien holders, each one will typically have their own Broker’s Price Opinion (BPO) done at the property before they accept the offer. When viewing properties, find out if the short sales have been “approved” or not. Approved short sales are those where the lender has already agreed to take a specific price. Short sales that have not yet been approved take the longest. Good communication from your agent can make this anxious time period go by faster. Don’t forget that just because you have an offer pending on a short sale, does not mean that you have to stop looking at homes.


Is it possible to save money by buying a short sale? Absolutely—yet not every short sale is automatically a deal. Make sure that your agent provides you with recent comparables (statistics of active, pending and most importantly recently sold homes in the area with similar characteristics). Just because the seller isn’t getting any money out of the sale of the house doesn’t mean they will automatically accept your offer.

Keep in mind bidding wars can happen before the listing agent submits the highest and best offer to the lender. How do you ensure that your offer will get accepted over others?

There’s no one winning formula, and it’s not always about the highest price. For example, the financing and terms are also important.  “Some banks may prefer the buyers with large down payments while others just want the highest price regardless of down payment”, according to an article in Realty Times.

An important point to consider is that with some short sale transactions, the junior lien holders may require the buyer to come in with extra cash to release the liens.

So, when the listing agent markets a property at $200,000 based on comparables, the lender in 1st position may accept a purchase price of $205,000, but the lender in 2nd position may require an additional $6,000 to release the lien. Every transaction is different, luckily. Buying a short sale where the owner only had one loan is generally going to save you time and money, but in certain markets, those are far and few between.

“As Is” Condition

Finally, if you’re going to purchase a short sale, don’t expect any repairs to be done for you. Lenders typically won’t pay to repair anything such as cracked slabs, broken windows, or leaky roofs. Though they may pay for termite fumigation when necessary, they will not pay for any cosmetic repairs or concessions. So don’t put an offer in on a short sale that clearly needs work if you don’t have the skills to do the work yourself or the money to hire someone to do it right.


If you are comfortable with the prospect of buying a short sale, first: get mortgage pre-approval. When you do, ask your lender if a.) they will finance a short sale and b.) what additional requirements there are, if any.

One financing has been assured, go ahead and submit an offer with your agent. Be sure to read all the paperwork that you submit and as well as all the lender’s terms and conditions that you get back. If you have questions about any of the paperwork, ask your agent or lender. Do not sign anything that you don’t understand!

Once your offer is in, be prepared to wait and wait and wait. With any luck, you’ll have an acceptance from the lender or lenders just before you start to forget that you made the offer in the first place!

Have you purchased or put an offer on a short sale? How did it work out? Share your story in a comment.

Published or updated on July 6, 2011

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About Sarah Davis

Sarah Davis is a real estate broker in San Diego, Calif. She enjoys helping both buyers and sellers and was voted one of the top 10 best real estate agents in San Diego in 2013 by Union Tribune readers. In her spare time she talks about real estate on a local radio show and manages her website RealtorSD.com.


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Brenda says:

    We have been waiting 6 months and still no final date. Freddie Mac wants us to sign a contract with provisions I don’t understand. Like the sellers can back out, we won’t sell it back to the owner, the tenant can stay on the property no longer than 90 days. Even my agent can’t believe how this has been handled. The bank even bought the second. This home is suppose to be for our daughter and her child, but I’m totally fed up and have a feeling this sale is not going through in the end.

  2. Allison says:

    We put in an offer on a short sale in mid February and were competing against other offers but we went in at full asking (which was fair market) and beat out the other offers. Two months in the 2nd leinholder agreed to the sale. 90 days in we had to sign an extension on our offer and within that month we had 1st lender approval. Then it was go time! Inspection, appraisal and submitting paperwork to our lender and now we’re in the home stretch just over 4 months in. It can be done!

  3. I’m currently looking for my first home and have considered buying a short-sale. However, my mom always jokes that “short sales should be called LONG sales!” Lucky for me, I’m not in any time crunch to purchase.

  4. Carolynne says:

    I, too, tried to buy a short sale. We put a very fair offer on the house–it was what it was appraised at, although it was $40k under what was owed on it. We couldn’t get anyone to take our money. Eventually, the seller filed bankruptcy and the house was foreclosed upon. It is now re-listed on the market for $20k over what we originally bid. At this point, it doesn’t make sense for us to buy it. We’re only going to be living in the area for another two years (military). We are, however, renting it–have been the entire time. I think in the end, it was a blessing that we didn’t buy it. Otherwise, we’d probably be stuck with a house that we couldn’t sell in two years when we need to move.

  5. KB says:

    My story is a unique one. My husband and I put an offer in on a short sale (a house we absolutely fell in love with) in January. The sellers quickly accepted our offer. A few months later their bank approved the deal as well. All seemed as if we were going to get the house until……we found out the sellers had a PMI. The mortgage insurance would not let the debt go. They struck the deal down; we countered with more money. The MI still said no AND they were determined to get a promissory for $27K+ from the sellers. The sellers were in no way going to sign the note ( I couldn’t really blame them for that). After a few months of bickering we broke down and offered to pay the note to the MI, after all we did love this house. They AGAIN said NO. NO to our MONEY! The MI refused our money and wanted the seller’s money in return. There was nothing to do other than let the house go. We wasted 5 months on this process and are still looking for a house to call our own.

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