Are you looking to buy a new home? Are you thinking that now's a great time to find bargains? That's true, but it pays to know a little about the seller's situation before you make an offer.

If a home is being sold for below what the current seller owes on the property—and the seller does not have other funds to make up the difference at closing—the sale is considered a short sale. Many more home owners are finding themselves in this situation due to a number of factors, including job losses, aggressive borrowing against their home in the days of easy credit, and declining home values in a slower real estate market.

A short sale is different from a foreclosure, which is when the seller's lender has taken title of the home and is selling it directly. Homeowners often try to accomplish a short sale in order to avoid foreclosure. But a short sale can hold pitfalls for buyers. Know the risks before you pursue a short-sale purchase.

You're a good candidate for a short-sale purchase if:

• You're very patient. Even after you come to agreement with the seller to buy a short-sale property, the seller’s lender (or lenders, if there is more than one mortgage) has to approve the sale before you can close. When there is only one mortgage, short-sale experts say lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take longer for the lenders to approve the sale.

• Your financing is in order. It’s important to show you are well qualified and your financing is set. If you're pre-approved and can close at any time, you will be in a stronger position. Write a strong offer and try to be aware if you are competing for the property against other offers.

• You don’t have any contingencies. If you have a home to sell before you can close on the purchase of the short-sale property—or you need to be in your new home by a certain time—a short sale may not be for you. Lenders like no-contingency offers and flexible closing terms. If you are, the strength of your offer is even more important.

If you're serious about purchasing a short-sale property, it's important for you to have expert assistance.

• You have some funds set aside for repairs. Sometimes homeowners delay maintenance and repairs.  Some loans require appliances, HVAC and plumbing to be in working order to complete the sale.  Distressed homeowners sometimes find themselves unable to make the needed repairs to sell the home.  This is normally the exception, not the rule.  But it pays to be prepared.  Once you move in, the home may need a little updating.  Include these factors in your considerations.   Make sure to adjust your houseing budget accordingly.

• A qualified "short sale"real estate professional.* You may have a close friend or relative in real estate, but if that person doesn’t know anything about short sales, working with him or her may hurt your chances of a successful closing. Interview a few practitioners and ask them how many buyers they've represented in a short sale and, of those, how many have successfully closed. A qualified real estate professional will be able to show you short-sale homes, help negotiate the purchase when you find the property you want to buy, and smooth communications with the lender. (All MLSs permit, and some now require, special notations to indicate that a listing is a short sale. There also are certain phrases you can watch for, such as “lender approval required.”) Find out how many short sales your realtor has completed and what their success rate is. Ask: “What percent of the ratified short sale contracts have actually made it to the settlement table?”

• Title officer. It’s a good idea to have a title officer do an initial title search on a short-sale property to see all the liens attached to the property. If there are multiple lien holders (e.g., second or third mortgage or lines of credit, real estate tax lien, mechanic’s lien, homeowners association lien, etc.), it's much tougher to get that short sale contract to the closing table. Any of the lien holders could put a kink in the process even after you’ve waited for months for lender approval. If you don’t know a title officer, your real estate attorney or real estate professional should be able to recommend a few. A title search isn’t free, so work with your realtor to determine when it makes sense to complete this.

• Experienced real estate attorney. Only about two out of five short sales are approved by lenders. But a good real estate attorney who's knowledgeable about the short-sale process will increase your chances getting an approved contract if your agent is not handling the lender communications. Also, if you want any provisions or very specialized language written into the purchase contract, a real estate attorney is essential throughout the negotiation.

Some of the other risks faced by buyers of short-sale properties include:

• Write a reasonable offer. There is a potential for rejection if you write a poor offer as in any transaction. Lenders want to minimize their losses as much as possible. If you make an offer tremendously lower than the fair market value of the home, chances are that your offer will be rejected and you’ll have wasted months. Or the lender could make a counteroffer, which will lengthen the process.

• Final terms of the transaction are determined well into the process. Even when a lender approves a short sale, it could require that the sellers sign a promissory note to repay the deficient amount of the loan, which may not be acceptable to some financially desperate sellers. In that case, the sellers may refuse to go through with the short sale. Lenders also can change any of the terms of the contract that you’ve already negotiated, which may not be agreeable to you. This can be partially remedied upfront by having your realtor do their homework before you commit. Gain as much information as you can about the seller’s financial position. Discuss the possibilities of liens, notes and etc with your realtor.

• Know what you are getting upfront. Short sales do not usually provide funds for repairs or repair credits. You will most likely be asked to take the property “as is.” Lenders are already taking a loss on the property and may not agree to requests for repair credits. Realize that certain loan programs require that all appliances, plumbing, electrical and HVAC be in demonstrable working condition. If you are seriously considering a property and these things might be of concern. Check those items while you are viewing the home.

• Know if you are prepared for a seller in desperate financial condition. Unfortunately, some sellers of short sale properties are facing severe financial difficulties. This means that they can be overwhelmed by their circumstances. They may be in such distress that they can’t afford to make even the simplest modification in the property to make the transaction work. For these types of circumstances, have a serious discussion with your realtor about such situations. Your realtor should also be talking to the listing agent about alternatives plans for a severely distressed seller.

* Not all real estate practitioners are REALTORS®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS® and is bound by NAR’s strict code of ethics. This article was produced by Realtor Magazine and adapted for use by Dawn Allen Battle. Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved. Adapted by Dawn Allen Battle.