Introduction: As with most things in life there is an ebb and flow, a cycle that all things go through to reach their peak or completion. So it is with a “short sale”, I have had a few easy ones but generally speaking it has taken 3 to 6 months to get an approval to move to close.
The Life of a Short Sale and Reasons Short Sales Take so Long:
Seller decides he can no longer make payments so he lists property with a Realtor® and gives the Realtor® an approval letter to speak to his lender. Seller gathers all of his financials, his budget, his taxes, his last 4 months of bank statements and his hardship letter. Realtor® then sends all of this in to the bank and you wait and you wait and you wait. NOTE: it will many times take days before the seller’s authorization letter gets to where it needs to be.
Next the seller’s Realtor® receives an offer and is enthusiastic because buyer and seller have agreed to the short sale price and have signed all the forms and additional short sale addendums. The listing and buyer’s agent then try their best to brace the buyer and the seller for the long months ahead.
Listing agent submits offer along with HUD-1 and any other updated documents that the lender needs are sent in and the fun begins. With the help of a great title company that helps gather this information, contract goes into the lender, listing agent calls each week and the lending company tells them that they are about 4 weeks behind on uploading documents to their system. Listing agent continues to call each week and the lender says they can’t find it and suggest the agent send it in again.
All parties get excited because a BPO (Broker Pricing Opinion) is ordered. Now to make it real fun there may be 2 mortgage companies to deal with so the listing agent does this twice. The first mortgage company now tells you that they are close to getting their deal approved and they ask for explanations of seller’s finances and additional documents that listing agent will send in with a gleeful heart. The lender informs the listing agent that while they are maybe only a month away from completion and it is now they inform the listing agent that, “oh by the way . . . we want you to call the second mortgage lender and tell them that although they are owed over $XXX,XXX on the second note that they will be glad to give them $3,000 dollars upon close”.
The first mortgage holder wants the Realtor® to get something in writing from the second mortgage holder . . . now it gets real fun.
Keep in mind that although the buyer knows they need to be patient, it is hard for them and they wonder what in the world is anyone doing . . . is anyone doing ANYTHING???
The second mortgage company informs the listing agent that the contract that they sent in was opened and reviewed and it was finally in the hands of the FIRST PHASE negotiator. Keep in mind that although the first mortgage is almost finished everyone has to wait on the second. Meantime fees are mounting if the buyer is behind on payments – and they usually are.
The first phase negotiator will keep the file (along with a hundred others) approximately 15 days to make sure all documents are present and complete that are needed and of course it has been a while so they need to be updated so the seller needs to gather updated paper work and send it all in again.
If all is well the file now goes to the SECOND PHASE negotiator who has 30 days to review it. If he finds all things well, the file now travels to the investor.
If all is well now the investor has from 2 to 30 days to review the file.
Shortly before close they let the seller in on what they are willing to do for them in the way of accepting a lesser amount owed and what the seller’s contribution needs to be (if any) and if all is agreed upon then we all move to close.
If the lender and the seller do not agree and if the buyer gets tired of waiting then it is back to the beginning of the short sale life cycle.
My purpose in sharing is not to discourage but to bring attention to the fact that a short sale is anything but short and the more inventory that is sold this way the more difficult it has become. There are no shortcuts (no pun intended) so just take a deep breath and be kind to anyone involved in this adventure, if patience is not your virtue it will become so.
I left out some of the duties that a Realtor® will do along the way because my main focus was to let you know why it takes so long so that you can just sit back and enjoy your life while the lenders, Realtors® and title companies are working the deal.