Short Sale | Why It Takes So Long To Buy
When home buyers look to buy a short sale they are either looking for a great deal on a home or because the home of their dreams happens to be listed as a short sale. If you are looking to buy a short sale then you have probably heard that it can be a long and often fruitless process. Knowing why it takes so long for a short sale to reach closing will help you not only be more patient but also to speed up the process and increase your chances of making the short sale your home.
What Is A Short Sale?
A short sale is named that because the owner of the mortgages, usually banks, are shorted the full amount of the loan through the sale. It is usually because the value of the home has dropped below the amount of the loan and the homeowners will not be able to make the payments on the home.
Historically, having a bank agree to a short sale was difficult, but ever since the subprime mortgage crisis, short sales have become more common. Banks prefer short sales to the alternative, foreclosures. Because foreclosures are expensive, 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 more lenders. It’s a complex process with many requirements. The short-sale package every lender requires from the seller must have every line filled out signed, dated, and initialed, every paper must be present and all documents must be up to date.
Additional Lenders = Additional Time
With every additional lender on the home, the process becomes more complicated. Each 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 primary lender must be re-applied to.
Has It Been Approved?
Just because a home is listed as a short sale doesn’t always 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, it’s possible that it will be denied. If you put an offer on the home and short sale request is denied, thats it. 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.
Nothing in real estate is as complicated or takes as long as buying a foreclosure home. It could take months or even an entire year for your offer to close on the short sale. A great short-sale real estate agent can make the difference between closing on the home you want and missing 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 counteroffer rather than accepting or declining the offer.
Buyer Beware
One of the dangers of buying a short sale is that the home is sold as is. The bank is not going to make any repairs and the seller has no incentive to. They will not be receiving any money from the transaction. If your offer is accepted, it is even more important than when buying a home in the normal way to have the home thoroughly inspected. Must read the Article on few reasons the home buyer shouldn't waive the home inspection.
Buying a home listed or advertised as a short sale is not for everyone. More often than not, the deal falls through for some reason or the home buyer loses patience with a home that just won’t seem to close.
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