A lot of folks ask me about buying a property that is offered as a short sale. A short sale is where the sellers owe more on their mortgage or mortgages than they can get from selling the house. Short sales are less common today then they have been in the last few years but they're still out there. Once the seller accepts an offer they will have to negotiate with their bank to release the lien and clear the title for the buyer. It can take several months for the process to work and can be very frustrating. There is nothing wrong with buying a short sale property as long as the buyer understands what to expect and it can be an opportunity to get a home at a nice price, although the property is likely to be sold in "as is" condition. It's important for buyers to go in with their eyes open if they are interested in pursuing a short sale. Each one is different and it's very important to do the research.
I find out as much as possible about the seller's situation and motivation since both are important considerations in bank approval of the transaction. Sellers need to demonstrate a financial hardship in order for the bank to approve the transaction and it can be hard work for the seller to provide all of the necessary information to get approval. I also want to know who is working for the seller. The odds of success are greater if the seller is working with an experienced short sale negotiator, either their listing agent or a third party negotiator. There are law firms that specialize in short sale negotiations and have established relationships with various banks. The market history of the property can also shed some light on how quick or frustrating the process might be. It might be easier to persuade the bank of the value of a property that has been on the market unsold at various price points. It can also be good if there has been an accepted offer presented to the bank that didn't close for whatever reason (typically the buyer loses their patience during the long process). That can accelerate the process for the next buyer since presumably the bank has done some analysis of the prior offer. It's not all doom and gloom, short sales can go very smoothly depending on the situation. A client is under contract on a short sale right now after receiving bank approval is just one day, we're closing within 45 days of the original offer. That's very unusual and everything lined up perfectly. All parties worked together for a smooth transaction.
Enough rambling, there's a video linked on this post that will explain the process in more detail if you're interested. I'm always available to talk if you'd like more information.