The deadline for a short sale is dependent on a number of factors, such as banks and brokers involved. From closing the first offer, it can take a quick short sale only 60 days. However, a short sale with problems along the way, might take up to a year to complete. According to Amy Simmons of Keller Williams Realty in Jupiter, Florida, the average short sale requires three to nine months.
Why It Takes Longer Than a Normal Transaction
A short sale happens when a homeowner sells a house for less than the amount due on the mortgage loan. They sell the House short of the outstanding balance, hence the term. In many cases, short sale is a strategy for avoiding foreclosure.
But homeowners cannot do this only on their accord. They need the lenderâ€™s permission, since the lender will likely be taking a loss in the deal. This is the reasons why a short sale takes longer than the regular transaction, generally speaking. In a conventional sale, the seller/homeowner doesn’t need the lenderâ€™s permission since they will pay off of the balance in full.
Short sales are usually more complicated for the reason that multiple approvals is usually required. There might be more than one lender involved. There may also be a private mortgage insurance protection (PMI) company that has a stake in the deal, and therefore some influence on the approval process.
Here is a closer look at the factors that slow down the short sale process:
Responsiveness of the vendor
One of the biggest causes of delay in the short sale is the seller himself. Their mortgage lender asks for documentation during the short sale process, and many times the lender will ask for updates on paperwork that has already been lodged. Many vendors have been slow to produce paperwork because they are disorganized, emotionally upset, or confused about the purpose of the paperwork. The ideal short sale seller immediately responds to requests for paperwork without questioning why the lender wants it.
Internal policies of the lender
Each lender has its own timetable for a short sale. Many borrowers try a loan modification first, and many lenders will not consider a short sale while a loan modification is being considered. Most of the time, the lenderâ€™s personnel is overwhelmed and that delays the process.
Involvement of alternative lien-holders
If there are actually multiple lienholders, that might lengthen the short sale negotiation because everyone has to approve the sale. In most situations, each lienholder may seek to limit what other lienholders receive, which could complicate the negotiation.
Involvement of a home loan insurer
If a loan insurer is needed, then they are required to agree on the amount of loss that the lender will take. That injects an additional decision maker into the process. The mortgage insurers sometimes have certain rules about what they would approve, and the lender may have to abide by those guidelines.
Involvement of a Government Service Entity (GSE)
If Fannie Mae, Freddie Mac, the Veterans Administration (VA), the U. S. Department of Agriculture (USDA), or maybe the Federal Housing Administration are involved, then they too have to approve the short sale. That injects yet another decision maker into the process, and each unit has its own system.
The sort of short sale program. There are government short sale programs, similar to the Home Affordable Foreclosure Alternatives (HAFA). There are bank programs, similar to the conventional short sale and the cooperative short sale. Every program has rules on timing. One system might require that the property not have an offer on it yet, while another lenderâ€™s program might just consider a short sale if there is a marked contract with a purchaser.
Involvement of a third party negotiator for the lender
Some lenders, particularly the Bank of America, prefer to use third party vendors to help negotiate with the seller. These third-party companies work for the bank and may have their own procedures in addition to the rules of the lender.
Involvement of an authorized vendor or attorney negotiating for your seller
A third bash vendor or attorney working for the seller could possibly have their own suggestions. They may only advance the short sale if most paperwork is received from the seller upfront.
The ability of your listing agent to help procure a buyer
Even if this short sale agreement process is switching along quickly, it is essential to get a ready, willing, and able buyer. Without a buyer, there is no closing. Some properties, such as houses in need of repair, may only entice a certain segment of the buyer pool. If a lender pre-approves this short sale at a certain price, but buyers believe that price to be too big, then there will probably be extreme difficulty in locating a buyer.
Expiration of the appraisal or Brokerâ€™s Price Opinion (BPO)
Even if there exists a buyer and the process is going along quickly, a lender might possibly slowdown the negotiation because the valuation of your property is very old. Some lenders could possibly only consider some sort of appraisal if it occurred in less than three months, while others may well only approve a short sale if the particular appraisal is just less than 6 months old. Also, it may take days or weeks for the appraiser or BPO adviser to submit his or her report.
How To Speed Up the Short Sale Process
Hiring an agent who has closed many short sale deals will serve as leverage since experienced agents know how certain banks work, what could be expected and how to best work through the complex process. But even the most experienced short sale agent can at times come across brick walls or challenges they simply cannot overcome.
The long and short of it is that the sale of a home in a short sale can save your credit if you know how the process works, so make sure the professionals you work with have a lot of experience.