What You Should Know Before Buying a Short-Sale

Short-sales offer an exciting, but also difficult experience for home-buyers. These types of transactions are especially so for first-time buyers who find negotiating a regular market-rate deal intimidating enough– to say nothing of negotiating a short-sale! So to help, Zip’s come up with some key questions you or your agent should ask when you find a property you are interested in, as well as some basic information you need to understand. That way, you get the full scoop on your  property’s status:

Key Questions to Ask and Information to Gather

  1. How many liens are on the property and what is the amount owed on each?
  2. Has a Short Sale package been sent to the banks and have they approved the Short Sale?
  3. Has the seller been served with a Notice of Default? How many months are they in default?
  4. Has a date been set for the foreclosure sale?
  5. Has the property been appraised by the bank and do you have the lender’s Broker Price Opinion (BPO)?
  6. Has the bank previously accepted and rejected offers on this home? Are there currently any offers being reviewed by the bank?
  7. Are the HOA (if any) dues current? How far behind are they? Who is responsible for bringing them current?

Contract Dates Can Change

Sometimes it takes awhile to hear from the bank, and the dates entered into your contract can (and likely will) be changed. All the dates in your contract are based on “acceptance.” For example, your closing date may be marked as “45 days from acceptance.” Be aware that “acceptance” will be the date the bank accepts the contract, not the date that the seller accepted the contract. Some banks won’t consider a Short Sale unless the seller and seller’s agent presents the Short Sale package along with a purchase contract from a legitimate buyer. If you are the buyer in this situation, be aware that the entire review process hasn’t begun yet... so you’re in for an especially long wait.

You should:

  • Be prepared to be flexible about when you’ll actually go into contract, and when you may ultimately close and own your new home.
  • Have the funds dedicated for your Earnest Money Deposit and Down Payment readily available and liquid so that once a bank tenders its approval, you’re able to meet your financial obligations under the contract in a timely fashion.

Heads Up!


Delays and Associated Problems

When purchasing a Short Sale, you should expect delays. In extreme cases it can take up to six months to get approval from the bank. As a potential Short Sale buyer, it’s important to keep the following in mind:

  • Loan Implications: Delays in a purchase process may affect your loan terms. Most loan rates can be locked in, but the locks do expire. Consult with your lender specifically as to the time frame for your loan locks and opportunities for extensions, if necessary.
  • Revocation of Acceptance/ New Buyers: While your process for approval is underway, the bank can consider other offers, as well as continue to market the property for sale and attract buyers who may offer a higher price. Be prepared that other offers may be presented that may ultimately trump your offer while you’re waiting.


If the seller of the home on which you’ve made an offer is in the foreclosure process there is always a risk that the home could go to a foreclosure sale before you’ve completed the Short Sale process. Some things to ask  :

  • Has the seller received a Notice of Default from its bank?
  • Has a sale date been scheduled?
  • Has the seller requested an extension or continuation of the sale? Can we request a continuation of the sale?

Based on the area you’re searching in, your agent may have additional questions to add to this list.

Other Resources

  • ZipRealty’s Learning Center, from which the above list of questions comes, offers a wealth of  free information for the potential short-sale buyers. Find these resources here.