What is a Short Sale?
When a house has been foreclosed upon due to a bankruptcy, etc., the lender is willing to sell at a discounted price to release the mortgage. This is a short sell. Here are some key points to keep in mind before making an offer on a foreclosed home. While it may seem like a bargain on the surface, a short sale can test your patience to the nth degree. (1)
Patience is a virtue
There is no question about it: short sales are an arduous process and can take a very long time. Waiting out the approval process can be daunting, even discouraging. However, if you are trying to take advantage of an opportunity such as a short sale, perhaps saving you thousands of dollars, your patience will pay off.
Neither threatens of cancellation, the property's location, condition, its location, nor any other urgency mean anything to the lender. Your best chances are to be patient and wait if you truly want the home.
How long should you wait?
It all depends on whether the listing agent has done their homework as well as the lender. Many listing agents prefer to source out their short sale negotiations to a third party, thereby delaying the process further. The wait time may can anywhere from 24 hours and up to 30 days, depending on how busy they are with submissions. (3)
But, you are not entirely at their mercy - here are a few things you and your agent can look into that may hasten the process.
Some factors that may cause additional delays:
- Additional levels of approval may be required
- FHA short sales through HUD are typically very lengthy.
- Something was omitted from the short sale package, such as mortgage insurance
- If it has been <120 days, ask your agent to contact the listing agent or third-party negotiator - call the lender to see if they have received the package. This may take you over an hour to get an answer
- Lengthy short sale approval periods can also be due to short-staffing or that tracking issues at the lender's office, requiring the listing agent to submit the short-sale package multiple times
- If the appraisal came back higher than your offer, the listing agent is building may be trying to get approval for a new appraiser.
How the Short Sale process works - from submission to approval
- Lender acknowledges receipt of an offer -10 to 30 days
- The lender calls for an appraisal - 14-60 days after receipt
- The file is reviewed - 2-10 business days after the appraisal
- A negotiator is assigned - 2 to 10 business days
- The file is approved or rejected - 30 to 120 days
- The first buyer may have withdrawn their offer; the whole process starts over with the 2nd offer (4)
Do your Due Diligence
- You will need a Buyer's Agent - ask them to look into similar sales. While the lender may be willing to negotiate to some degree, the offer needs to be both reasonable and close to market value in order to be considered/accepted. Have your agent look into other listings by the short sale agent as well as their experience - lack of either or both will hinder a closing.
- Should you hire a short sale attorney? When it comes to short sales, a good short sale lawyer cannot only negotiate the sale but they also give you legal advice about the transaction - this is something your real estate agent cannot do. The attorneys at the Law Offices of James C. Shields can assist you to handle the process expeditiously (2)
- Ask how many other offers have been submitted. The listing agent does not have to disclose the offers, but they can tell you how many other offers have been submitted ahead of yours if any.
- It is not uncommon to offer more than asking price if there are several offers on the table; it just depends on how committed you are to purchasing that property
- Is the listing agent's short sale package complete? If the required paperwork is incomplete, the short sale package will not be processed - rest assured that the attorneys at James C Shields will have all this information
- How many mortgages secure the property? Your agent can provide this information
Unfortunately, you can't always avoid problems on a short sale. Whether you are buying or selling a short sale home, call the Law Offices of James C. Shields for expert handling of the purchase or sale, alleviating undue stress. There is no substitution for an experienced tough-as-nails, attorney - one who knows exactly what to say and do to get the lenders to cooperate.