How to Find Short Sale Homes: A Guide for Buyers

Why would I want to consider buying a short sale home?

The primary appeal of buying a short sale home is the potential to secure a great deal. Since these properties are often sold below market value, you might be able to purchase a home at a significant discount.

For example, consider a scenario where the homeowner originally bought the property when market prices were at their peak. If the market has since declined, you could step in at the right time and purchase the home for much less than its original value, potentially saving tens of thousands of dollars. However, it’s important to remember that while short sales can offer bargains, they often come with additional complexities, such as longer processing times and the need for lender approval.

Another advantage of buying a short sale home is that typically there’s less competition from other buyers. Unlike foreclosures, which might also offer bargains, short sale homes allow you to tour the property before making an offer. This gives you the opportunity to assess its condition firsthand. Additionally, with the seller’s consent, you can arrange for any inspections you deem necessary, even before submitting your offer. In many cases, short sale homes also are in better condition than foreclosed properties, which may have been neglected or left vacant for extended periods.

A short sale is short on money, but very long on time. I’ve seen it take as long as a year. You’re going to be waiting a long time, and if you have your heart set on a property, you can be very disappointed.

What are some of the drawbacks to buying a short sale?

As-is properties: Short sale homes typically are sold in “as-is” condition, meaning the buyer is responsible for any necessary repairs or updates. Additionally, lenders involved in a short sale may be reluctant to cover all the seller’s closing costs, as they are already incurring a financial loss on the property. This can lead to buyers needing to shoulder more of the closing expenses themselves.

“The only reason you’d want to buy a short sale is you’re going to get a good price on it,” Wallace says.

Patience required: And, buying a short sale can be a real test of patience. The process can take a long time because you’re not just waiting for a response from the homeowner, but also from the bank or lender, which often involves lengthy approval procedures.

“A short sale is short on money, but very long on time,” Wallace says. “I’ve seen it take as long as a year. You’re going to be waiting a long time, and if you have your heart set on a property, you can be very disappointed.”

That’s because even if the homeowner has approved the offer, “the lender can come back six months later and say, ‘No, we will not accept this price.’ So you’re going to be waiting a long time — and you might never get approval.”

Legal considerations: When buying a short sale, it’s essential to be aware of the potential legal considerations that may arise during the process. One critical aspect is understanding the possible tax implications. In some cases, forgiven debt from a short sale might be considered taxable income, so it’s wise to consult with a tax professional to avoid unexpected tax liabilities. Additionally, ensure you review all contractual terms carefully, as short sales can involve complex agreements and stipulations.

It’s also beneficial to seek legal advice to navigate any potential complications. An attorney experienced in real estate transactions can help you understand your rights and obligations, review documents, and address any issues that may arise with the lender or seller. Being proactive about these legal considerations helps ensure a smoother transaction and minimizes the risk of legal or financial surprises down the line.

OK, I’m interested. Where can I find short sale homes?

If you’re considering buying a short sale in your area, your first step should be to find a skilled buyer’s agent. Wallace says that an experienced, well-established agent who knows the area can guide you through the complexities of the short sale process, help negotiate with lenders, and increase your chances of a successful purchase. Use HomeLight’s free agent match tool to discover how we can help you find the perfect Realtor® for your needs, streamlining your buying process for the best outcomes.

Many brokerages offer specialized lists of short sales to clients who express interest, so ask your agent if their brokerage provides this service. Also, talk to your agent about the possibility of gaining access to the Multiple Listing Service (MLS), which will allow you to search for short sale homes in your local area.

You can search for short sales directly through the MLS, where they are often listed and sometimes clearly marked. Listings may explicitly state “short sale,” or use other indicative phrases such as “subject to bank approval,” “notice of default,” “headed for auction,” or similar terms that reveal the property’s status.

Another way to locate short sales is by working with an agent who specializes in them. These listing agents represent lenders and typically handle multiple short sale listings at once. They often hold certification in Short Sales and Foreclosure Resource, or SFR, from the National Association of Realtors. However, even if you find a short sale through such an agent, it’s advisable to have your own buyer’s agent to represent and protect your interests throughout the process.

You can also find short sales by visiting the courthouse. At the city or county clerk’s office, you can access lists of individuals who are in loan default, also referred to as pre-foreclosure. This stage occurs before foreclosure, typically lasting about six months after a homeowner’s final missed mortgage payment. During this period, the homeowner is at risk of foreclosure, and the information available at the courthouse can help you identify potential short sale opportunities.

Wallace notes this is merely a way to track homes that may become short sales — but far from a guarantee that they will. “Most of the time, they find a way to make mortgage payments,” she says. “But it’s an indication of who’s having trouble paying the mortgage, and there’s going to be a lot of those right now,” she adds.

While newspapers and Craigslist might not be the most current methods for finding short sales, they can still be useful. You can check your local newspaper’s real estate section or search Craigslist under “real estate for sale” using terms like “short sale” or “foreclosure.” However, for the most accurate and up-to-date information, it’s often better to use specialized real estate platforms and MLS services, which offer real-time updates and comprehensive details. Working with a real estate professional can also provide you with the latest listings and market insights.

You also can use classified ads in a proactive way by posting your own advertisement to announce your search for a short sale home. Consider posting on community bulletin boards, relevant social media groups, and other local online platforms. This approach allows you to directly express your interest in purchasing a short sale property and can attract sellers or agents who may have leads on available homes. Engaging in both digital and real-life spaces can increase your chances of finding opportunities that may not be widely advertised.

You can leverage your networking skills to find short sales by joining a local real estate investor club, where you can connect with investors actively seeking properties. While these investors might be your competitors, they may be looking for rentals or fix-and-flip opportunities and could know of homes that don’t meet their criteria but could be a perfect fit for you. Additionally, consider engaging with real estate investment platforms and forums where industry professionals discuss opportunities and share leads. This can help you access exclusive listings and insights not available on mainstream real estate sites.

You can also search online platforms, which offer a range of tools for finding short sales. Many real estate websites and apps have dedicated search features specifically for short sales, allowing you to filter listings based on this criterion. Platforms like Zillow, Redfin, and Realtor.com often have advanced search options where you can select “short sale” as a filter to view properties that are available under these terms.

Additionally, some platforms are designed exclusively for distressed properties, including short sales and foreclosures. Websites such as Foreclosure.com and Auction.com cater specifically to buyers looking for these types of properties and provide detailed information on each listing.

To enhance your search for short sale opportunities, take advantage of HomeLight’s comprehensive resources, which include a range of tools and calculators to help you evaluate short sale properties and understand their potential value. This includes detailed market insights and expert advice that can aid you in making informed decisions. Leveraging these tools can provide you with a competitive edge, offering valuable information and support as you pursue short sale opportunities and work toward securing a great deal on your next home.

Unlock savings with a short sale home

Diving into short sales can be a smart way to snag a great deal on a home. While the process might be a bit more complex and time-consuming than traditional sales, the potential savings are often worth it. Keep in mind that the number of homes selling “short” can vary based on changing market conditions, both locally and nationally. By using a mix of resources — like MLS listings, real estate investor groups, online platforms, and even courthouse records — you can get a solid start on finding short sale opportunities. Don’t forget to team up with a knowledgeable buyer’s agent to guide you through the process. With a bit of patience and effort, you’ll be well on your way to finding a great property at a bargain price.

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