Mortgage lenders typically consider only the highest and best offers. So a short-sale home buyer needing time to obtain a mortgage or meet other conditions can slow down the closing process. Also, if your short-sale buyer misses the agreed-upon closing date, your mortgage lender may void the sale. Mortgage lenders prefer to close short sales within 30 days or less after approving buyer offers.
In fact, lenders often push for closing short sales within two to three weeks of sale approval. If you've found a short-sale buyer for your home, you and your buyer should be prepared to accommodate your lender's speedy closing time frame. You can also help your short sale closing by staying in close contact with your lender throughout the closing process. Arm's length transaction requirements usually prevent mortgage lenders from approving home sellers' relatives as buyers in home short sale situations.
In an arm's length transaction, parties to the transaction can't have business or personal relationships with each other. If you have a private mortgage insurer, you might also need to obtain its permission as well to conduct a short sale. Tony Guerra served more than 20 years in the U. Many banks will discount the price a little from market value, but an offer should be reasonable and close to comparable sales if it's going to be accepted. You might ask your agent to check out the short sale listing agent's track record as well.
A poor short sale closing record on the listing agent's part usually means your chances of getting an approval are slim. The listing agent might refuse to reveal the offer prices, but they should disclose how many offers have been received. You might have to offer more than the listing price if multiple short-sale offers are on the property.
Find out if the seller's short sale package is complete. Bank negotiators will not process a file if it's missing the required paperwork. The file will probably take longer to close if more than one lender is involved. Some junior lenders might demand unsecured promissory notes from the seller or more money than usual from the first lender.
Other lenders will also only consider the first offer. If you're not the first, your offer might fall by the wayside. What is "normal" for the waiting period depends on the bank. Some banks get approvals in less than 30 days, while other banks' short sales can sometimes turn around in 24 hours. On the opposite side of the spectrum are other lenders so swamped with short sale submissions, their employees may not respond promptly.
The process is generally as follows after submission of the offer and a complete short sale package from the seller:. Some short sales require additional levels of approval.
If a government entity is involved, you should add a couple of weeks to your short sale approval expectations. The process can be slowed if the loan has mortgage insurance that the borrower didn't add. If you're running past days, it's possible that the listing agent or a third-party negotiator is not on the ball and is lax about calling the bank.
Calling the bank often means waiting on hold for anywhere from 10 minutes to an hour or longer—not something anyone would look forward to multiple times. An especially lengthy short sale period can also mean that the bank has internal problems, a staff shortage, or that it's lost the file a few times; this causes the listing agent to resend the package over and over again. An extended delay can also mean that the appraisal is substantially higher than your offer, and the listing agent is building a case for a new appraiser.
If you see a home languishing on the market month after month as a short sale, it's usually not the lender holding up the sale. The buyer might have canceled, which starts the entire process all over. Unfortunately, you can't always avoid problems on a short sale. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades.
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The information on this site does not modify any insurance policy terms in any way. Still, these distressed sales could become part of the homebuying landscape again. A short sale can yield a good deal on a property, but it generally takes a certain amount of fortitude and patience, plus a lot of luck. A short sale is when a lender agrees to accept a mortgage payoff amount less than what is owed in order to facilitate a sale of the property by a financially distressed owner.
The lender forgives the remaining balance of the loan. Buying a home through a short sale is different from buying a property at a foreclosure auction , or one that is actually owned by the bank, known as an REO or real estate owned property. In this scenario, the homeowner has negative equity and may need to get rid of the home. A short sale is not the same as a foreclosure. In a foreclosure, the bank repossesses the property and then tries to sell it for enough to recover its costs.
However, a short sale can forestall foreclosure and its negative impact on your credit. The buyer gets the property at a reduced price, but the property in all likelihood has its share of problems — think fixer-upper — and the deal needs to go through considerable red tape to make it happen. A lender may even require a buyer pay additional closing costs that might be normally assigned to the seller.
The lender takes a financial loss, but perhaps not as large a loss as it might if it foreclosed on the property. In a short sale, the proceeds from the transaction are less than the amount the seller needs to pay the mortgage debt and the costs of selling. For this deal to close, everyone who is owed money must agree to take less, or possibly no money at all. That makes short sales complex transactions that move slowly and often fall through.
For the most part, everyone gets some sort of benefit in a short sale, although everyone gives up a little, too. In the end, a short sale is about staving off worse outcomes. A short sale might be able to help you preserve your credit to some degree by helping you avoid a foreclosure on your record.
A short sale can take as little as a few weeks or as long as several months. Because short sales are complicated transactions, they tend to be more time-consuming. Plus, the original lender needs to review the short sale offer to determine whether they will accept it.
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