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localrecordsoffice 'Local Records Office'
12mo Los Angeles, CA, United States Story
The Homebuyer's Guide to Buying a Short Sale in Pekin, Illinois - Local Records Office

LOCAL RECORDS OFFICE - "A short sale is a home selling less than its face value and typically sells for less than what the homeowner owes on the mortgage," says the Local Records Office in Pekin, IL. Usually, it occurs when a homeowner fell behind on payments due to hardship. The bank and/ or another lender that owns the mortgage prefer a short sale over letting the home go into foreclosure. A short sale has its pros and cons, as it can be a good opportunity for some buyers, but can also present some challenges.


Home seller avoids foreclosure and has an easier transition to move into affordable housing. The lender also takes a financial loss, but usually not as large of a loss when one forecloses on the property. Foreclosures are expensive and time-consuming, so by agreeing to a short sale, the lender is accepting the inevitable and trying to minimize losses. After foreclosing, the lender owns the home and must pay insurance and property taxes to maintain it. So, instead of making money every month, they now have the extra responsibility of putting out money.  The lender also sees a short sale as looking good on paper, because the property never gets listed, unlike a foreclosure, and this helps the lenders numbers.

Some buyers have negotiated with the lender and helped minimize the damage to the seller's credit score rating. The loan will appear as "paid" with the following notation of "settled for less than originally owed" which is far more favorable than foreclosure.


A short sale may still appear andimpact the homeowner’s credit record. You walk away without a penny from the deal, making it more difficult for you to find another place to live.  Most lenders move too slowly and the short sale ends up falling apart, so be sure to do everything you can to get the lender to move quickly.

Why lenders will not approve or consider for a short sale

The lender can and will hold the borrower responsible for every penny owed.

When the seller files for bankruptcy, few, if any, lenders will consider negotiating a short sale because negotiating a short sale is considered a collection activity, and these are prohibited in bankruptcies.

Second or junior lenders will also absorb most of the loss. And a home equity line of credit requires approval from all.

Steps to buying a short-sale

When buying a property that is undergoing a short-sale, you will get the property for a substantial discount. And you will mostly like have cooperation from the seller because they are involved in the sale. The lender is also eager to get the money paid back to them that they loaned out, making them sometimes offer more favorable financing terms.

  • Locate potential short sales 

Locate pre-foreclosures by using online databases, or consult with a realtor who has proper training or a good track record in handling short sales. A short sale requires necessary attention from an experienced agent or an attorney.

Determine how much is owed on the house in relation to its approximate value. When it's high, it is a good candidate because the seller will have more trouble selling it for enough to satisfy the loan, as opposed to an owner who has a lot of equity.

  • View the location and the property

Figure the value of the property and comes up with a rough estimate of the amount of work and how much it will cost to renovate.

  • Figure out the profit margin

Do your research on what the property is worth and the profit potential. When you are an investor or a homeowner planning to live in a home for even a short time, you will want to profit from the deal.

  • Liens and Mortgages

Be sure to find out of any liens through the seller or his agent and which lender is the primary lien holder.

  • Finance

Be prepared financially, and have good credit, because the existing lender may be willing to provide you a loan. An authorization letter is necessary and usually notarized and allows for the lender to discuss the mortgage situation with you.

  • Contact Lender

Be sure either you or your agent speak with the loss mitigation department or even the resource recovery department rather look into recouping the past due to loan payments. It is usually on the biggest initial challenges- to find the final decision-maker.

  • Complete the lender’s short sale application

Most lenders have an application specific for a short sale.

  • Proposal

-The purchase and sale contract: will be signed by you and the seller to buy the property at the agreed upon price. The lender will need to see a sizable down payment, and a sizable amount of money posted to approve the short sale and it is essential to have the lender contingent upon approving in writing.

-A hardship letter: the lender will not discuss a short sale until the homeowner has fallen behind on payments, usually, for 90 days. 

"The lender must recognize the seller’s inability to pay the loan, and see that the situation is irreversible" says, Local Records Office

To make the case, it must start with a letter written by the seller to give an overview of their situation. The seller should provide details, such as documentation and as much evidence as possible, ie. divorce papers, evidence of job loss, or delinquent accounts, utility shut-off letters, car repossession notices, last two years of tax returns, recent pay stubs, and bank statements.

-A statement of the property's value: is an appraisal or a broker's opinion. The lower the estimate, the better it is for the buyer. Compile a list of problems the home has and show the lender and the seller that they would not get enough for the home during a normal sale to satisfy the loan.  This part is critical, and Richard Geller, of MortgageReliefFormula(dot)com, recommends doing this before the lender performs a valuation.

-Details of the costs and liabilities: convincing the lender they are better off with you taking the property off the seller's hands, all the better. Taking photos of property damage and getting estimates of the property is also a good time to take a better look at the property and decide on whether the money and time spent fixing it up are worth it. One of the liabilities the lender faces in foreclosure is being forced to make repairs to get the house resold.

-Settlement statement: is prepared by a closing agent or a real estate lawyer. It outlines the price, the closing costs and plus other costs and fees associated with the transfer. A net sheet of all the information can be entered onto a HUD-1 Settlement Statement sheet to see the final result at closing.

  • Negotiate

At often times, the lender will come back with a counteroffer. Figure out the highest limit and figure before making a final decision.

  • Come to an agreement

When there is an agreement with all three parties, get everything in writing and officially recorded. Come to terms with a final agreement and make sure the seller understands all the terms of the deal. 

5 common mistakes buyers will make

  • Ignoring the property problems
  • Skip home inspections
  • Ignore the legalities and insurance
  • Leaving too little time for a closing
  • Falling too hard for a bad home

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