This is a totally newbie naive question, but I want to know so I gotta ask!
Let's say I find a home in a broker's webpage that appeals to me. Let's say the listing says "short sale pending bank approval". I know roughly what those words mean, and I'm not immediately scared away by them.
Let's say, next, that for the sake of simplifying this hypothetical question, the 1st mortgage is the only lien on the property.
Now let's say that
- I, the buyer;
- the seller/occupant/owner (whatever is the right term for someone in this situation), who owes more than he owns; and
- the bank, who the seller owes $ to;
all agree on a figure. I pay that amount.
What do I get for my money? I.e., do I get free and unencumbered title to the property?
You should get, at a minimum, a special warranty deed and clear title. Without question, get a title policy to ensure you're covered. A short-sale is essentially a seller to buyer transaction with approval of the shortage by the lender. Other than that, it just takes a while to process but everything else should be the similar to a standard transaction (with few exceptions).
Yes that's why its always good to get title insurance though. The bank is taking less than they should be taking so there will possibly be restrictions when you purchase it. I just closed a short sale not to long ago where the bank would not pay for the title insurance, search fee or past HOA dues so if the buyer still wanted to buy the property they would have to eat those fees as well. But after all said and done the property will be free and unencumbered.
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