How to Spot an Opportunity—and Avoid the Pitfalls—When Buying a Home Below Market Value

In a market like Los Angeles, where affordability is always top of mind, short sales often grab buyer attention with below-market pricing. But like most “deals” in real estate, short sales come with trade-offs. Understanding the process, the risks, and how to navigate the details is key to making a smart purchase.

Here’s what you need to know before pursuing a short sale in LA.

What Is a Short Sale?

A short sale happens when a homeowner sells their property for less than the amount owed on the mortgage—and the lender agrees to take the loss. This usually occurs when the homeowner is facing financial hardship and wants to avoid foreclosure.

Short sales must be approved by the lender, which means they involve more paperwork, more time, and more uncertainty than a typical sale.

Why Buyers Consider Short Sales

• Below-market pricing: Lenders may be motivated to approve a sale if it avoids the higher costs of foreclosure.
• Less competition: Many buyers avoid short sales because of their complexity.
• Opportunity for equity: If you’re willing to be patient and invest in improvements, a short sale can yield long-term gains.

What Buyers Need to Know

• The Lender Is in Control

Unlike traditional home sales where the seller accepts your offer, in a short sale, the bank or loan servicer has final approval. Even if the seller accepts your offer, the bank can reject it, counter it, or take months to respond.

• • Be prepared for delays—30 to 90 days or more is common.
  • There’s no guarantee your offer will be accepted.
• "As-Is" Means Exactly That

Short sales are sold as-is, and in many cases, the seller is in financial distress and unable to make repairs. You’ll still have inspection rights, but don't expect the bank to offer credits or fix problems.

• • Always get a home inspection
  • Be prepared to handle issues like deferred maintenance, liens, or even tenant evictions
• You Need an Experienced Agent

Short sales require someone who understands:

• • How to work with loss mitigation departments
  • What documents lenders will request (such as hardship letters and BPOs)
  • How to manage expectations on both sides

At the Stephanie Younger Group, we’ve guided buyers through numerous short sale transactions and can help spot red flags early.

• You May Wait—and Still Get Beat

Even after waiting weeks for approval, the lender may accept another buyer’s offer—especially a higher or all-cash offer submitted after yours. Short sales are not first-come, first-served.

• Financing Must Be Flexible

You’ll need a pre-approval letter or proof of funds upfront. If you’re financing your purchase, your lender must be able to accommodate a longer timeline and potentially extend your rate lock multiple times.

Buyer Tips for Short Sales

• Be patient – These deals can take months and are often unpredictable.
• Do your homework – Research property title, liens, and HOA dues before getting too far in.
• Hire the right professionals – Your real estate agent, escrow company, and lender should all have short sale experience.
• Stay emotionally detached – Many buyers lose short sale deals through no fault of their own.

Are Short Sales Common in LA?

While less common than they were during the foreclosure wave of the 2008 housing crisis, short sales still happen in LA—particularly in cases of:

• Job loss or hardship
• Divorce
• Adjustable-rate mortgage resets
• HOA debt or tax liens

They’re more likely to show up in condo and townhouse markets where values have been more volatile.

Final Thoughts

Short sales can be a great opportunity—if you have time, flexibility, and the right guidance. But they’re not for the faint of heart. If you’re serious about exploring one, make sure your team is prepared and your expectations are grounded.

The Stephanie Younger Group has helped dozens of buyers purchase distressed properties in LA—and we’ll guide you every step of the way, from the first offer to lender approval.

Disclaimer: This post is for informational purposes only and does not constitute legal or financial advice. Buyers should consult with a licensed attorney or mortgage advisor before purchasing a short sale property.