Short Sales: Why Exactly Do They Take So Long?
A short sale is named that because the owner of the mortgage, usually banks, are shorted the full amount of the original loan through the sale. It is usually because the value of the home has dropped below the amount of the loan and the homeowners are unable to keep up with their scheduled mortgage payments.
In the past having a bank agree to a short sale was difficult, however, since the real estate crisis of 2009, short sales have become much more common. Generally, banks prefer short sales to the other option, which is a foreclosure. This is due to the fact that foreclosures are expensive, and banks will usually settle for a short sale to get the most money back on their investment. For the home seller, a short sale is a renegotiation of their debt to one or potentially more of the lenders. The entire thing is a complicated process that has a number of requirements. The short-sale package every lender requires from the seller must have every line filled out, T’s crossed and I’s dotted. In other words, every paper must be present and all documents must be up to date.
With every additional lender on the home, the process becomes increasingly more complicated. Each and every lender has to approve how much they will be receiving from the sale of the home, and lenders’ approval only lasts 30 days. If a secondary lender approves the short sale outside of that window of time, the homeowner must then go through reapplying to the first lender.
It is important to remember that simply because a home is listed as a short sale does not necessarily mean that the seller has had that short sale status approved by her lender or lenders. Because a seller can list the house as a short sale before the bank approves or denies the request, which means that it is possible that it will be denied. If you put an offer on the home and short sale request is denied, that is the end of the line for the sale. There is no longer a home on the market to bid on. The entire process is made more complicated if there has been a foreclosure notice filed as well. The home could go from short sale to foreclosure before your offer has time to be approved by the lender.
Foreclosures
Foreclosures can be frustrating, even for the most experienced real estate buyer. There is nothing in real estate that is as complicated or takes as long as buying a foreclosure home. The entire process could take months or even an entire year for your offer to close the short sale. A great short-sale real estate agent can make the difference between closing on the home you want and miss it by a few days, hours, or dollars.
Part of the reason short sales take so long is that banks can take two to three months to respond to your offer on the home. And this response could be a counter offer rather than accepting or declining the offer.