Pros and Cons of Considering a Short Sale Purchase in Wisconsin

 Posted on November 07, 2025 in Residential Real Estate

In today’s housing market, Wisconsin homebuyers may turn to short sales as a potential way to become homeowners. Short sales are homes that are sold for less than the current owner owes on his or her mortgage. The sale must have the lender's approval and usually occurs when a homeowner is in financial distress and can no longer make their monthly mortgage payments.

The lender, in an effort to avoid costly foreclosure proceedings, will agree to accept less than is owed on the mortgage. While a short sale can be a good real estate move to get more house for your money, there are potential pitfalls. Whether you are a first-time buyer or even a seasoned buyer, it is advantageous to speak to a knowledgeable Northwoods, WI real estate lawyer.

How Are Short Sales Governed Under Wisconsin Law?

Short sales are primarily contractual and, as such, are governed by state-specific regulations and general real estate principles, detailed in statutes (Chapter 846) and enforced by the Wisconsin Department of Financial Institutions and the Wisconsin Department of Revenue. Wisconsin also offers certain incentives for short sales under programs like the Home Affordable Foreclosure Alternative Program, which provides financial incentives to investors and buyers to encourage short sales.    

What Are the Advantages of a Short Sale for a Wisconsin Homebuyer?

The primary advantages of a short sale for a homebuyer include:

• Short sale properties usually cost less -  sometimes as much as 10-25 percent below market value.
• There is less competition since the short sale process is known to be time-consuming and complex; therefore, for those who need to buy a home now, a short sale is usually not a viable option.
• In some instances, the lender may agree to cover agent commissions and/or some closing costs to facilitate the sale.
• Unlike foreclosed homes, which are often vacant, leading to damage and neglect, short-sale properties are typically still occupied by the owner, who has a vested interest in maintaining the property.
• There is the opportunity for home inspection and due diligence, which is not often seen with foreclosure auctions.
• Since short-sale sellers voluntarily engage in the process to avoid foreclosure, they are generally more cooperative.

Disadvantages and Hidden Risks Associated with Wisconsin Short Sales

Lenders can take anywhere from 60 to 180 days (or even longer, in some cases) to review and approve a short sale offer. Sellers who are selling their home in a short sale generally lack funds for home repairs and maintenance, which can result in undisclosed defects. There is the potential for multiple-lien complications, with second mortgages, HELOCs, and tax liens. Appraisal delays and lender-imposed short-sale requirements can disrupt closing schedules. Lender approval letters often expire within 30 days, requiring tight timelines once approval is obtained.

Buyers must be prepared for rejections, counter-offers, and even lender withdrawals after months of waiting. Some short-sale homes could have pending foreclosure filings, making a comprehensive title search an absolute necessity. Buyers of a short-sale property should always confirm whether unpaid taxes or deficiency judgments could carry over to new ownership. While this is rare, it is a possibility.  

Protecting Yourself as a Wisconsin Short-Sale Buyer

If you are considering buying a short-sale home, hire a real estate attorney early on who will ensure your contract includes "subject to lender approval" and an inspection contingency. Set realistic expectations for closing delays and ensure that title and lien status are verified before lender approval. A property inspection must be conducted, along with a municipal compliance check.

Contact a Northwoods, WI Residential Real Estate Lawyer

While Wisconsin short sales can offer amazing value, they are not for everyone. Having an experienced Wisconsin real estate lawyer from The McCormick Law Firm, LLC, who can guide you through the approval process and draft protective contract language, is essential. Attorney McCormick is licensed to practice real estate law in Wisconsin and can work with Illinois residents who are looking to purchase property. Call 630-517-8570 to schedule your free consultation.