You may be able to purchase a Manhattan Beach home at a good price through a short sale, but you need to be patient and flexible. If you absolutely have to be in your new home or complete a 1031 exchange by a certain date, a short sale purchase is probably not the best approach for you.

A short sale does not mean that it happens in a short amount of time! Though I have heard of a short sale that was approved by the lender in less than a week, typically short sales take months to complete. A short sale means that the amount of money the lender receives for the current mortgage is short of the amount owed.

In addition to the buyer and seller, there is at least one other stakeholder in the short sale transaction – the lender who wants to get as much money from the transaction as possible. The lender's alternative to the short sale is foreclosure. There may be multiple lenders involved, when the seller has a second mortgage or a Home Equity Line Of Credit (HELOC). If the lender(s) cannot get more money from a short sale than from foreclosing, they are not likely to approve the sale. Sometimes the terms required by the lenders for a short sale cause the deal to fall apart. If the seller had to pay private mortgage insurance (PMI), because they bought the home with a low down payment, the PMI company also gets involved and can create additional delays.

Advantages of Buying a Short Sale

• Seller (homeowner) is motivated to sell. They will not be holding out for an inflated offer price. Their home is worth less than the amount of their mortgage and they are having trouble making the payments. Their credit rating will suffer less for a short sale than for a foreclosure.
• The lender is motivated to sell. They would rather have the troubled asset off their books at a favorable price, than face the expense and uncertainty of foreclosure.
• With both a motivated owner and a motivated lender the purchase price is usually lower than comparable properties offered as a standard sale.

Disadvantages of Buying a Short Sale

• The time to purchase the home is unpredictable.
• The terms offered by the lender to both the buyer and the seller are unpredictable.
• The home is likely to be offered as is, with no repairs or credits.
• The seller may back out and opt for a foreclosure, if the lender demands too many concessions.