Many factors influence how long a short sale will take, from finding a qualified buyer to receiving the lender’s approval. In addition, homeowners will need more time if they have multiple loans on the property. Because of these multiple factors influencing the timeline, it is hard to determine when the sale will go through; therefore, homeowners and buyers will need to stay patient through every step of the process. Homeowners and buyers should work with an experienced real estate agent to help them take the right steps and avoid delays. This guide provides information about how long a short sale may take.
Short Sale Process Timeline: Sellers
Depending on the state, the short sale process differs, as each region determines how to best navigate the steps and legally complete the sale to the lender and buyer’s satisfaction. Only by following those particular guidelines can sellers properly relinquish ownership of the property and ease their financial challenges.
There is still a risk of a delinquency judgement, however, which demands repayment of the difference between the sales price and total owed on the mortgage loan. Even with this judgement, a short sale allows homeowners to move forward in resolving their hardship of mortgage obligations. Easing their stress starts with their understanding of the general short sale timeline followed across most states. The following information explains the offer approval process from beginning to end.
Although finding a buyer interested in the property can take time, it is the lender approval process that increases the short sale timeline because the lender will lose money on the transaction.
In order to qualify for a short sale, homeowners must provide the lender with an extensive short sale package to begin the review process. This package often includes:
- Listing agreement
- Signed purchase contract
- Hardship letter
- Proof of hardship
- Authorization letter
- Closing disclosure
Upon receiving this package, the lender will proceed to the property valuation stage to determine if a short sale is a reasonable solution for the homeowner. In order for a lender to complete this step, they will need a broker to evaluate the property and provide a broker’s price opinion, or BPO.
After receiving the broker’s report, a loss mitigation specialist will compare the BPO to any available offers and examine the total owed on the mortgage to weigh the risks. The lender will then determine if they want to reject or accept a buyer’s offer, or they may decide to send a counteroffer to the buyer instead. Because the lender may want to negotiate the buyer’s offer, this step takes the longest to complete.
Upon receiving acceptance of the offer from the lender, the process then moves to the closing stage, where the buyer can choose to have a home inspection performed. Additionally, the lender may choose to perform an appraisal. Depending on these factors, the closing process can take anywhere from four to eight weeks.
Exceptions to the Timeline
Although many short sales are completed in four months, there are several factors that can extend the timeline. If the property has multiple loans or lien holders, for example, the offer must be reviewed by additional parties before the short sale is rejected or approved. Each lien holder must agree on the terms of the short sale before it can be approved, adding up to four extra weeks to the total.
Because short sales take a long time to complete, buyers can become impatient and back out of the purchase, which adds more time in finding a new buyer.
Although rare, if the lender finds the BPO or appraisal is inaccurate, they may choose to dispute it. In either situation, this can extend the short sale process up to 12 weeks. A longer wait occurs when the lender chooses to let the BPO expire before seeking another one, as required in some areas.
A longer waiting period can also arise if the lender rejects the buyer’s offer. Although most lenders are likely to submit a counteroffer instead, rejections do occur occasionally, which will start the short sale process over.
Short Sale Process Timeline: Buyers
If a buyer wants to purchase a short sale property, they must be prepared for the short sale timeline. By understanding the timeline in advance, buyers can prepare themselves with confidence in the process.
A buyer can benefit from working with a real estate agent who has experience with short sales. Buyers can ask for referrals and search online for an agent, which can take one to two weeks.
After they have found an agent, the buyer will need to visit the short sale properties they are interested in purchasing, as visits will allow them to assess the suitability and condition of each property. Depending on what is available in the buyer’s area, searching for short sales and visiting them can take at least one week.
Once a buyer finds the property they are interested in, they will need to submit their offer to the seller and their real estate agent. If the seller accepts the offer, the real estate agent will write up a purchase contract, which both the buyer and seller will need to sign. This contract will accompany the short sale package for delivery to the lender. Writing up the contract and completing the signing process often takes up to two weeks to complete.
Between hiring a real estate agent and submitting an offer, buyers should seek pre-approval for a mortgage loan from their preferred lender. If buyers decide to research many lending options, the loan application process may take up to two months. Therefore, this step should be completed early in order to secure funding before the offer goes to the lender.
The longest waiting period arrives once the short sale package is delivered to the lender. Since lenders lose money on the sale, they take an in-depth look at the offer, comparing it to the broker’s price opinion and total owed on the loan. Although most lending agencies complete the review process in less than four months, it can extend 12 full months if any complications arise such as if the property has several liens attached.
If the buyer times everything right and the sale goes through, they may complete the purchase in just four months. However, they should allow up to 12 full months to navigate this process.
Can the Short Sale Process Be Accelerated?
Although much of the short sale timeline is dependent on the lender’s action, there are a few ways for buyers to decrease their wait times, including working with a real estate agent. Agents who have experience with short sales can offer guidance that allows the buyer to take the right steps.
Beyond working with a real estate agent, buyers should:
- Research the loan balance using public records
- Submit an offer as close to that balance as possible
- Minimize contingencies and reduce negotiation attempts
Buyers can also minimize their timeline by having an inspection completed before submitting the offer. Although they may lose the inspection fee, verifying the property does not have any serious concerns can further prevent the waiting timeline. Once an offer is accepted, the buyer can perform a final walkthrough before closing to confirm the condition of the property matches the inspection report.
Although there are many challenges and long wait periods, short sales can be worth it for buyers who are willing to remain patient during the process. By preparing in advance, buyers and sellers can understand their expectations and avoid feeling stressed while waiting to achieve their desired results.