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Short Sales in Los Angeles

Short sales in Los Angeles

Short sales occur when a homeowner sells the house for an amount less than what is owed against it. This process needs approval by the lender and is always aimed at avoiding foreclosure. It will thus provide a better choice, according to experts like California Association of Realtors on real estate finance for short sales to help these unfortunate homeowners while offering another way out for potential buyers looking to buy properties in shorter price than they usually are. The way short sales work in the Los Angeles housing market is crucial to buyers and sellers alike, since prices in this location are so much higher than the national average of any other state.

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What is a Short Sale in Los Angeles?

A short sale in Los Angeles is a sale of a home in which the proceeds from the sale do not cover the outstanding mortgage balance. This is when the homeowner owes more on the mortgage than what is currently worth in the present market. According to the U.S. Department of Housing and Urban Development (HUD), the lender first has to approve a short sale before it can go through, accepting less than the total owed on the mortgage. The Los Angeles market experiences an increase in short sales during times of economic decline or when the values of the properties go down due to overvaluation. Short sales can be advantageous to sellers because they allow them to avoid foreclosure, which can severely affect credit scores. To buyers, short sales represent opportunities to buy homes below their market value, though the process may take longer and involve more negotiation compared to traditional home purchases.

How Can I Find Short Sale Homes in Los Angeles?

Potential buyers looking for short sale homes in Los Angeles can begin the process by searching through Multiple Listing Services, which list available properties, including those in short sale status. Websites like Zillow and Realtor.com also offer filters that enable users to search specifically for short sales. According to Redfin, phrases a buyer could use when searching online include “short sale,” “foreclosure,” and “pre-foreclosure.” To make it even more local, real estate agents specializing in distressed properties are usually a good source of information. These agents often have access to listings not available to the general public and can give valuable insights into neighborhoods where short sales are more common. In Los Angeles, the short sale opportunities often come in locations where the property values have fluctuated, such as East Los Angeles or around the outskirts of the city.

What Are the Benefits of Buying a Short Sale Home in Los Angeles?

The most attractive advantage in buying a short sale home in Los Angeles is purchasing the property below market value. Short sales are usually cheaper because the lender is in a hurry to recover as much of the loan amount as possible, even if it means taking less than what was owed. The National Association of Realtors estimates that short sales can also offer buyers fewer bidding wars compared to traditional sales, especially in competitive markets like Los Angeles. Other benefits include.

  • Lower Purchase Price: Buyers often purchase homes for 10-30% below the market value, depending on the urgency of the lender and the property condition.
  •  Less Competition: Since short sales require approval from the lender and may take a lot of time, not many buyers would like to go through it, hence less competition.
  • Potential for Negotiation. Buyers might be in a position to negotiate further concessions, such as closing cost assistance or repairs.


On the other side, though, the total upfront price of a short sale may be lower; buyers should also be prepared for additional costs like home repairs and maintenance, as short sale properties are often sold “as is.”

How Does the Short Sale Process Work in Los Angeles?

The short sale process in Los Angeles involves several steps that take a number of months to complete. It starts when a homeowner applies to his or her lender for a short sale because of financial distress. The lender has to approve the homeowner’s financial condition, the value of the property, and other factors before approval is granted. The California Department of Real Estate explains that once the lender approves the short sale, the property can be listed for sale. Steps involved in a short sale.

  1. Homeowner Submits Short Sale Application. This includes providing financial statements, a hardship letter, and other documentation required by the lender.
  2. Lender Reviews Application. The lender reviews to determine if the short sale makes financial sense, and this may take several weeks or months.
  3. Property is Listed for Sale. Once the lender has approved, the property can be listed for sale on the MLS as a short sale.
  4. Offer is Submitted to Lender. Once a buyer makes an offer, it must be submitted to the lender for his approval.
  5. Lender Approves Offer. The lender may counter or approve the buyer’s offer; this too is a process that could take some more time based on the policies of the lender.


According to Fannie Mae, the general timeline to complete a short sale in California is 90 to 120 days, though this may vary depending on the complexity of the transaction and how fast the lender can respond.

How Do I Qualify for a Short Sale as a Seller in Los Angeles?

A homeowner in Los Angeles may be qualified for a short sale provided that he is experiencing a financial hardship, is incapable of selling the property to cover the mortgage, and the lender approves the sale. According to the Federal Housing Finance Agency (FHFA), a financial hardship exists under circumstances such as loss of job, illness, or reduction of income that impairs the ability of the homeowner to pay his mortgage. The usual qualifications that lenders require are as follows.

  • Financial Hardship: Proof of income reduction or unexpected expenses.
  • Negative Equity: The property has to be worth less than the remaining mortgage balance.
  • Lender Approval: The lender has to accept the sale price, possibly even taking a loss on the loan.


In Los Angeles, where home prices can change wildly, short sales often involve homeowners who purchased at the market’s height and now owe more than the property is worth.

What Risks Should I Be Aware of When Buying a Short Sale in Los Angeles?

When purchasing a short sale in Los Angeles, buyers should be aware of several risks. According to Bankrate, one of the most significant risks is the property’s condition. Many short sale properties are sold “as is,” meaning the seller or lender will not make any repairs or improvements before the sale. Additionally, because the approval process can take months, the property’s value or condition may change during the waiting period. Key risks include.

  • Lengthy Approval Process: Short sales can take a great deal longer to complete than regular sales.
  • Property Condition: Properties are often sold in dismal condition and may require significant repairs.
  • Potential for Lien Issues: Some short sale properties come with additional liens or debts that buyers must sort out.

While short sales can offer low prices, it is so important that buyers conduct good inspections and work with experts in the field to reduce these risks of such incidents.

For more information on Real estate Short Sales in Los Angeles contact Big Town Real Estate today

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