Although a short sale may indicate tough times for the seller, avoiding foreclosure is generally a positive thing. For buyers, short sales mean big savings and a great deal on a home. However, there are some things to consider before taking the leap into the short sale market.

Know This

Short sales are known for their lengthy purchase process. Since the bank stands to lose money by allowing a short sale of a home in default, they often play hard ball with potential purchase offers in attempt to get the most money for the home.  This is why they will collect multiple offers and sit on them in order to get the best deal. Many lenders will deny offers with conditions like closing cost assistance or financing approval. If you are still thinking of pursuing a short sale here is how to get a leg up:

• Get pre-approved for your loan before placing an offer.
• Present your best (highest price) offer the first time.
• Keep your offer clean of any conditions, like closing costs or financing.
• Be patient.

Short Sale Alternatives

You may not have the time to wait on a short sale negotiation, but that doesn’t mean you can’t still find a great deal on a home. Look for homes in areas that have a higher number of short sales. Often, homes in these areas are priced lower due to the devaluation effect brought on by the nearby short sales.  Consider buying a fixer-upper, many homes in need of some renovation can be bought at a great price and then turned into your dream home.

Avoid companies making big promises to settle your debt at all costs. Typically they are looking for a quick buck, and are really only in the business of filing debt paperwork and then consolidating debt—neither of which will put you on the right direction in and of themselves. After all is said and done, you may be paying exactly what you were before or just slightly less in a single monthly payment. If credit card companies refuse to work with you, contact a financial attorney or nonprofit credit-counseling agency.

This is what you should expect from credit counselors:

• Debt Counseling

A debt counselor will examine your finances and determine a course of action for you.

• Calculate a new budget

With you, the debt counselor will draw up a new monthly budget for you that will make you financially fit in the long-term and allow you to pay off your credit card debts.

• Determine program duration

The debt counselor, having exhaustively examined your financially situation, will give you a program term. This is the length of time you will be making payments on your debts. This term is usually 2-4 years.

• The Trust Account

A debt counselor will open a trust account for you and you will pay into that trust account. You will not pay lenders until you have accumulated a large enough sum to begin debt negotiations. The trust account is secured through the federal government, and you will receive monthly statements from it just like a bank.

Once you have built up enough savings, your debt counselor will start credit negotiations with the bank. These negotiations start when you have saved 50% of what you owe your lenders.

• Make a settlement offer

With your trust account savings, you now are in a position to negotiate with lenders. You can push for a lump sum payment settlement where banks get a percentage of the outstanding balance. Because you have hard cash stockpiled in a trust, banks may be more willing to settle for less.