Buying a short sale property can be quite the process; make sure you know the challenges associated with trying to close on a short sale.
There is no easy answer to the question, ‘how long does it take to close a short sale’. The most accurate answer is, it depends. Some short sales can close in as little as a few months, while some take closer to a year to close. In a short sale situation, the buyer must make an offer and the seller must approve the offer (just as in any other home sale), but, in the case of a short sale, the seller’s bank must also approve the sale. Essentially, the seller is asking the bank to accept less money than is owed, and this is typically the point in the process where delays happen.
You should know: buyers and buyer’s agents have no control over the short sale process and how quickly or slowly it goes. The time it takes for a short sale to close relies heavily on the listing agent. Fox Business provides some information that helps short sale buyers prepare for the process:
Here are the steps – and possible holdups – that a short sale must go through before being approved:
- The seller’s bank reviews the short sale package. Before approving the sale, the lender will request a complete short sale “package” from the seller, which includes information on the seller’s finances, such as debts and assets, credit score, and the contract to purchase the home.
- Documents get lost, pages go missing, and signatures are left blank. In most short sale cases, lenders require hundreds of pages in the package, many of which require signatures from buyers, sellers, and agents. If one page is missing or one signature line is left blank, the document won’t be processed. It is not uncommon for the listing agent to fax the lender 100 pages and wait a month to get a response from the bank, informing the agent that things are missing.
- Some documents become outdated before they can be processed. It could take weeks to get the documents “processed” and put onto the desk of a negotiator, who actually reviews and negotiates the short sale package. For example, if the short sale package contains one bank statement from the beginning of the month, while all the others are from the end of the month, that one bank statement may soon be outdated, and the bank will require an updated one. If this happens, it could take the lender weeks to find this and another week to contact the seller or their agent.
- 4. The lender wants more information. Often, the lender will ask to see the buyer’s proof of funds, review the preliminary title report, or request more verification of the seller’s hardship (job loss, divorce, job transfer). Once the package moves beyond the lender, the negotiator could request just about any additional information, which can further slow down the process.
- 5. Foreclosure trumps everything. Even if you have a good offer for a short sale on the table, if the seller is too far behind on their payments, the foreclosure process kicks in. Sometimes the foreclosure department and the short sale department, at the same bank, don’t work in conjunction with one another, which causes a whole mess of problems. When the foreclosure process starts, it doesn’t matter what short sale offers are on the table – the seller no longer owns the house and isn’t legally allowed to sell it. When a home goes into foreclosure, it belongs to the bank, not the seller.
Not every short sale will be plagued by these issues, but you should be prepared to wait some time during the process. An experienced short sale agent may be able to speed the process up somewhat, but it is difficult to predict and overcome every challenge that may be thrown their way. To learn more about the short sale process, check out this article from Fox Business.