Short Sales are anything but short, actually theyÂ take a long time.Â Â A short sale means the Seller will be â€˜shortâ€™ of enough money to pay off their full mortgage balance.Â Â
mortgage balances need to be paid in full to pass on a clear title to the new
buyer. Enter, the short sale.Â The sellersâ€™ ownÂ Mortgage Company
agrees to accept an amount short of what they are owed and release the lien on
the house.Â The process takes anywhere from 4 to 12 weeks and sometimes
There are 3 main reasons the processÂ takes so long.
1. The Sellerâ€™s mortgage company will do a thorough analysis of the Sellersâ€™ current financial hardship before making a decision.Â This analysis includes lots of paperwork from the Seller.Â Quicker progress can be made if the Seller has everything ready, or turned into the bank at the time of the offer.Â If the Seller does not have a clear hardship, a short sale may be denied.
2. Many Sellerâ€™s have two mortgages, a First Mortgage and a Second Mortgage.Â This further complicates the process because both Mortgage Companies must agree to settle for less than they are owed. Second Mortgage companies can hold up the entire short sale if they refuse to agree with the very low amount offered to them.Â Â I have seen First Mortgage companies offer the Second Mortgage Company $2000-$4000 to settle a loan balance ofÂ $40,000 or more.
3. Understaffing at the mortgage companies forces the files to wait for weeks and weeks before they are reviewed.Â Â A mortgage company needs to expand their space, hire staff, buy computers, invest in software, andÂ trainÂ employees to accommodate the number of short sale requests.Â The problem is, designing and creating a new, Short Sale department costs lots of money and the entire department exists only to lose money.Â Itâ€™s no wonder mortgage servicers havenâ€™t rushed to expand.
When considering a short sale purchase, ask your agent toÂ find out if the Sellerâ€™s Hardship has been recognized by the bank, if the paperwork has been submitted, how many mortgages are on the homeÂ and most importantly, ask if the Listing Agent is CDPE certified and how many Short Sales they have completed.Â
As always, youÂ are welcome toÂ contact me ifÂ youÂ need assistance negotiating a Short Sale purchase.