You received a few good answers from local & long distnace Realtors, allow me to give you a little insight to the "bank" side of this process.
The Seller's bank (and often their can be more than one creditor involved) is being asked to allow the Seller to walk away from their responsibility to some of the $$ they owe. Banks are legally responsible to their stockholders and so they must make the decision to let this happen based on financial reasons, not just sympathy.
A few things need to take place before the bank gets to make this decision:
1) The Seller must understand that they will not be walking away from this sale with $$ being given to them. They would get moving expenses. They recieve no cash from the sale. They will get a release that helps them avoid things like foreclosure or bankruptcy. It's like getting a Monopoly "Get Out Of Jail Free" card. This is one of the hardest parts to this process.
2) The Seller needs the advice of someone that knows how to do short-sales. Not some that read an article or heard some seminar, they need an Attorney that has done them. Successful short-sales require knowing who to call, what to give them and persistance. Using someone without experience is why most end up dragging on for months.
Once these two issues are addressed, then the Seller must provide certain documentation to their bank so that the bank can decide if a short-sale is appropriate. This documentation can include:
1) Copies of the Seller's last 2 years of tax returns.
Why: The bank wants to see what the Seller has been declaring. Do they have interest & dividend income? Do they own any other property? Why would the bank let the Seller walk away from their obligation if they had other means to come up with the money they owe!
2) Copies of recent paystubs.
Why: Again, why would the bank let them off the hook if they could actually afford to make the payments.
3) Copy of a recent credit report for the Seller
Why: The bank wants to know who else they owe. Have they paid everyone else except the mortgage? Maybe they need to sell the BMW with the $800/month payment instead and then they can afford to pay their mortgage.
4) Copies of Asset Statements (Checking, Savings, etc)
Why: Agin, if the Seller has money saved, they need to take the responsibility and pay what they owe instead of looking to walk away from their obligations.
5) A "Hardship Letter"
Why: The bank wants the Seller to explain to them why they should be allowed to be released from part of their obligation. Seller's need to explain things like job loss, medical issues, etc and be able to support anything they say. Making up stories to get out of paying is not going to work.
Once the bank has all of this information, they can now look at the offer presented and between all of this make a financial decision regarding the request. Remember that the alternative for the bank may be to start a foreclosure process. This can often take many months as well and cost them substantial amounts of money. In the end, they may have the same house being sold as a bank owned property for the same amount of $$ or even less. So it may make more sense to agree to the short-sale instead of dragging out the legal process.
If the process is taking more than 45-60 days, it is more likely that some part of the process i described above was not done properly. Often Seller's refuse to provide some of the documentation because they have other assets or don't want the bank to see something. Many times the delay is caused by the fact that there are multiple lenders with liens on the property. Each one has to see this documentation and the 2nd, 3rd or lesser lien holder is often told they will be getting nothing or next to nothing. If that happens their is really verly little incentive for them to agree to the sale.
I realize this answer is a little long-winded, but I hope it helps you to see what goes on. As a Buyer, you stand an excellent chance of getting a home for below-market price with a short-sale. But as a Buyer, make sure you have good representation too. You Attorney can make the calls to the Seller's side to find out if all the above was done properly & how many lienholders need to be negotiated with. If it not being done right, then yes, you may have many months to go and may never get approved.
I hope this helps a little.
Sales Manager & Sr. Mortgage Consultant
Wells Fargo Home Mortgage
1. Agentâ€™s use them as an advertising source to get buyer interested in a home that is listed way under value. To get buyers to call them and sign an exclusive buyers agency agreement locking them into buying for 6 months. I bet this is even the case in the few states that don't allow Limited Agency. They probably circumvent that by using a team and Referral Agreement between agents. While this is going on the agent has an investor off in to the bank and is gather these names to buy the home form the investor either as simultaneous close or in 90 days as allowed by FHA.
2. The investor simultaneous flip. Agent gets an investor to make a very low offer and they work with the bank to get this accepted or countered at their banks drop dead point. Then while they are doing this the agent keep the property active on the MLS liking for buyers willing to pay close to retail price so they can make $20,000 or more on the simultaneous close. Usually the investor is the negotiator so they have no real interest that a short sale gets approved its how much money they need to make. Unfortunately this causes some home to be sold at foreclosure sale. The worst is asking the seller to Quitclaim the property to then buyer and stall the bank for 90 days so the new buyer can simultaneous close with a FHA buyer because FHA requires 90 days of ownership. I wish the banks would get smart and ask for a current title search for the title company with chain of ownership like lenders require. That would stop this fraudulent and dangerous practice the bank would say no sale and turn it over to the federal task force investigation this. Oh yea if your doing this itâ€™s real and I have talked to them and advised them on investor groups doing the quitclaim scam. Any agent that would even consider having his client give his property ownership to some investor need to be expelled from the National Association of Realtor and sued for breach of contract.
3. Some agentâ€™s donâ€™t know what they are doing on a short sale and should not be attempting it. Like the FHA and VA rules and the HUD form you have to fill out to get a short sale approved prior to listing it. They have specific rules forms and % of net to the bank that you must be within. If you donâ€™t know that please donâ€™t list short sales.
So what can you do as a buyer or buyerâ€™s agent? First off make reasonable offers. Do the work on want a good retail price for a home is. The bank would give the property away. In most cases it 86 to 88% of the current retail price net after closing cost, yep based on the dredged banks BPO (Broker Price Opinion. What do you do with the listing agent you ask if an offer is accepted and presented to the bank? If no make an offer that clearly states when accepted your offer will be exclusively worked on with the bank until the bank reject your offer. If they donâ€™t feel your offer is high enough for that, then have a first right of refusal if any other offers come in you have 48 hours to make your offer match their more desirable criteria or back out of first position. Also have a time line for presentation to the bank 72 business hours after acceptance of the owner.
If there is an offer find out if there are back up offer or if you can be the primary back up offer with the same binding contract if now walk away. Now please as a buyer make a reasonable offer base on the sold comparables. With your agents determine the reasonable retail value of the property per above guidelines. Now if prices are dropping 5% a month ok offer 5% less than last monthâ€™s sales. Use your agent and do the home work and the bank will accept your offer. If you offer 50% the bank will put it in a stack of file that wonâ€™t be worked on.
It makes me nuts to see agents accepting offer after offer on a property. Buyers have rights! You as an agent need to advise your seller on accepting a good offer on the property based on it selling criteria. Agent and seller have to assume the responsibility to accept good offer and maybe then banks would be able to complete them on 20 to 30 days. I want to see the term low ball offer to get the ball rolling taken out of our language as Realtors. Lets replace it with we have an offer or we do not have and offer the owner accepted or we have an offer with a price contingency? Letâ€™s make the buyers feel valued again.
The uncertainty in outcome and timing is nearly a certainty with short sales. And with the increase in overall application volume at banks, demands of short sale processing against trimmed staffing levels, and the overall increased demand in buyer activity due to the tax credit, I can say with near certainty that it would be highly unlikely that you will have time to find, negotiate, and work your way through a short sale process in time to close on or before the Nov. 30 deadline.
Frankly, if you are interested in qualifying for the Federal Tax Credit, you need to move and move fast even with a traditional deal. Many banks have already set deadlines for mortgage applications in order to ensure processing in time. And those deadlines are likely weeks away. That doesn't leave much time to find, negotiate and get your mortgage application completed and through underwriting.
But if you are ready to buy, the tax credit is an opportunity worth seizing. We are hosting a Buyer's Seminar this Sat. in our office in Warren and I invite you to attend - we host these every month - but this one really is the last one before time runs out to qualify for the tax credit, if financing is involved. Click on the link below for more info on the Buyer's Seminar. Please call me directly at 908-337-0943 or email firstname.lastname@example.org to RSVP - all are welcome but space may be limited so please RSVP today.
"Unwavering Commitment to Service"
Search the MLS at http://www.feenick.com
Find the property
Make an offer
Offer is signed by seller
Offer with Short Sale package is sent to Servicer(s) / Lender(s)
Servicer orders an appraisal or a Broker Price Opinion (BPO)
Missing documents and update HUD-1 Estimate
Could be more wait.
Short Sale approval arrived.
Buyer perform inspection (if any)
Complete PA is deliver to Home Mortgage consultant.
20-30 days more: closing.
Short sales take alot of time, I'm an averaging in northern Colorado area, once offer is received and the bank starts the process approx 4-6 months. Then another 40 days to close.
Buying a short sale is like buying any other property, same process, preview the properties, make offer,
apply for your loan, and then set back and wait.
As part the offer/negotations you will sign a short sale addendum, this addendum explains all the risks that are involved for both Buyer and Seller, time element, tax consequences for the Seller, and states that Buyer or Seller can cancel the contract at any time upto the offer being accepted in writing by Seller's bank.
Due to the length of time to process short sales, it is only fair that the Buyer or Seller can cancel at any time
as their housing needs may change over the months.
The $8,000 First Time Home Buyers Credit can apply, however the $8,000 credit will expire 11/30/2009,
if it is not extended.
Once an offer is received, it can take as much as 45 to 60 days to even get a call from a negotiator so as I said, if you have the time to wait, it can be worth it. A first time home buyer can apply for the $8000 tax credit but based on the expiration date of the tax credit now at November 30th, it would be very unlikely for it to close before if you haven already submitted an offer.
I have been successfully selling short sales for some time now. The process is long. It can take any where from 90 to 120 days and sometimes longer if there are issues with the deed. Once I heard the bank didnt have property title to the house and the buyer had to wait longer to clear the title.
I have extensive continuing education in short sales and foreclosures in Connecticut. In a few weeks, I will be Certified in Short Sales and Foreclosures. (CSF). As far as the $8000 tax credit is concerned, my suggestion to to seek out an attorney would specializes in Short Sales for advice.
Good Luck with your new home.
Arthur Hardy, Realtor
W.C. & A.N. Miller Realtors
4910 Massachusetts Ave NW
Washington DC 20016
(202) 362-1300 office
(202) 362-3164 fax
(202) 895-2860 direct
Know of anyone thinking of buying or selling a home? Referrals are greatly appreciated.
Great answers and information! I just recently posted a blog on this very subject here on Trulia http://www.trulia.com/blog/michael_giles/2009/09/no_deadline
This is a subject that you could write volumes about. The real problem is that there is not one standard way of handling a short sale. Every Agent has their own ideas and ways of working with the Banks. I outlined in that blog some red flags to look for that will help to determine the potential of a successful transaction.
Best of Luck!
My recommendation is to keep looking - you can toss your hat in the ring on this house, and then move on to others. If the short sale defies historical probabilities and moves quickly great, if not, you remain actively engaged in your search. If you find something else, get yourself under contract and then retract/cancel your short sale offer. Your attorney can -and should - advise you on this.
You still have time to complete your purchase in time for the tax credit - but you do have to hustle. This will be a topic at our upcoming Buyers Seminar - Sat. 11 at our office. To attend RSVP to me at email@example.com - I'll be there.
"Unwavering Commitment to Service"
Search the MLS at http://www.feenick.com
You can fget the $8,000 tax credit as long as you are a first time home buyer. Can it be used for closing costs? probably not, as we are too close to the deadline.
The process depends upon the banks involved. I am in one with Chase manhattan Bank that has an offer since April and we are closing on 11/01. I ahd another with Wells Fargo that closed in 30 days.
Is there a method to the madness, not really.
If you make a reasonable offer and the listing agent is on the bank, maybe you can make it to a January close. The banks are worried about their bottom line and not concerned about the buyers needs and wants. There are number that need to be made and if you fall in the guidelines, you will be approved.
But define your needs, do you have a mortgage pre approval? putting down $..?
100% financing on a short sale is a pretty tough deal and I am not too sure it would work.
Call or email and we can discuss further.
Oh, BTW, sorry about these agents from other sates that make rambling, no sense statements to be the "first answer" like it is a big deal or something.
The process may take two months or maybe six months. You have to be prepared to wait for the seller's lender to decide whether or not to accept. Also, Plainfield has a pretty stringent Certificate of Occupancy requirement, so check out the house carefully with your agent to see if there are any potential violations. In a short sale the seller generally will not take care of any problems in order to get the C.O.
Check with a tax professional about the tax credit and whether your qualify. A short sale may not be the best way for you to go as there is no guarantee that you will close in time to qualify for the tax credit.
Good luck, Jim Miner
Some short sales have taken 6-9 months to close and others have closed within 30-90 days. It depends on several factors, included but not limited to: the lender; if the owner has already submitted their short sale package; if the short sale has already been approved by the bank and within a certain price range; if the listing agent has experience in short sales; if the attorneys have experience in short sales; etc.
As far as using the $8,000 tax credit you would qualify if buying a short sale property, as long as you meet the other requiremetns, HOWEVER since the credit expires on November 30, 2009, it will be unlikely that you will be able to close in time to take advantage of the $8000 tax credit when buying a short sale.
Hope that helps.
Gina Chirico, Sales Associate
Prudential NJ Properties
973-992-6363 ext 116 office
- Submit offer.
- Seller signs offer
- wait .. wait .. wait .. Seller comes back with approval, denial or counter offer from bank
- If approved, schedule your inspection and start securing your mortgage.
Besides the wait .. wait .. wait .. there is not much difference on the Buyers side ..
If you're serious about making a short sale deal, the best advice I can give is to find a good, full time Realtor with short sale experience, who has the time and is willing to invest that time into making your deal go through, and then give him or her all of the information they request, in as timely a manner as is humanily possible.
If you're a first time homebuyer, the tax credit will apply. It is a federal thing directly related to the purchaser and has no bearing on the seller or the sale, other than the usual things that would be considered in a conventional purchase. Having said that, unless the credit is extended, you must close on the property by Nov. 30. That's right, close. Done and finished, so that gives you only 60 days to complete the deal. Unless you have a very proactive agent, a very good offer, and all other information in place, it is doubtful that you will make the deadline. Hopefully Congress will see the need and benefit to an extention and sign the bill.
I hope this helps.
While I have not read the previous responses all I can say is that no two deals are alike, be it as "short sale", forecolsure or conventional deal, especially in today's market with potential mortgages applicaitons being under a scrutiny that did not exist n the recent past.. To directly answer your question :"long does the process take", infortunatey none of us know as each bank is different as we can only hope that the :process" would eventually net us (and the potential buyers) a definitive fimte frame.
In ckosing, all I can say is that if this is the home of your dreams, hang in there as the fruits of your labor may well be worth your investiment in time.
Love and Peace.
Francesc,a, Realtor, ePr, SRES
it takes about 120 and so on... Keep on looking, the hunt is on and you may stumble upon a good property that is worth waiting for.
One of the reason it takes so long is the bank requires copies of all bank statements, tax returns, w-2s, and other supporting documents to verify that the homeowners cannot afford to keep making their payment and have a financial hardship. Once this paperwork is received, it is reviewed by a loss mitigation specialist. After they review the paperwork and BPO (broker priced opinion), a fair market value of the home, and itâ€™s approved, it just moves to the next step.
The next step is having the investors sign off. This may include a long list of investors who own pieces of this mortgage loan. If this is the case, each investor must sign off on the short sale. You can imagine these investors arenâ€™t very happy about taking a loss on their investment, so donâ€™t expect them to go out of their way to approve the short sale. If and when the investors sign off, you just may have your approval.
As a seasoned short sale Broker Associate I will never submit an offer to a Seller's bank without a completed short sale package. I have a very detailed lenghty list of required information and documents that the Seller has to complete before submittal of his offer.
On a average it is taking the banks 30-60 days to respond that they have even received the file, before they can even begin to process it, order appraisals, BPO's, assign a negotiator, etc. Normally by the time the bank enter's into negotiations with the Seller it is 4-5 months old, then of course the bank requires certain
document to be updated, pay stubs, bank statements because the file is so old and they want updated data.
The files are followed up with the bank on a weekly bases with phone calls that can takes hours and many
holds and transfers. So it has been my experience that the Banks are taking 4-6 to process short sales.
Would love to hear from other Realtors, especially if you are successful on doing short sales under 60 days as normal transaction. I would be very interested in learning your process and your thoughts.
- First you need to understand the value of the property. A pretty easy way to do this is by using a realtor and having them pull a Comperetive Marketing Analysis (CMA) report. They will be able to tell you what the property should sell for based on Fair Market Value (FMV). If you are not using a realtor, you can do your own market analysis. Be careful though because the free services provided on the Internet tend to not be very accurate.
- Second there are going to be two cost that affect you.
1. Closing costs and
2. Loans/liens costs
You need to determine what the costs are going to be to sell the property (see Web Reference:). You have to consider all the fees involved if you are using a Realtor. If not you might have a difficult time doing this accurately and efficiently. You can attempt to do this on your own, just call your local title comapny or Realtor and ask what typical closing costs should be expected for the purchase price of the property you're considering for the short sale. They may provide you a Net sheet for estimated closing costs. However you still need to calculate all the costs involved that are going to affect your short sals purchase with the lender.
The other costs are the loans/liens.
You will need to contact the bank/lender to discuss the account with them. before they speak to you they will request an Authorization to release (ATR) form. That is a form that will allow you to speak to the bank/lender on behalf ot the homeowner. You need make sure you speak to the assigned person in charge of the account in question. You do not want to waste time with someone in Customer Service if they are not in charge of the account. However, you do want to talk with Customer Serivce and ask some specific questions about the file before talking to the assigned Loss Mitigator (the reperesentative in charge of handing the account).
Short sales vary, depending on the agents and banks involved. My last one took just over four months and fell apart at the end. I have done one in just over 8 weeks start to close, but, we had all the paper work into the bank as requested and followed up with the bank on a weekly basis. The key person in short sale is the listing agent. If they are not versed in short sales and lack follow up, you are in for a long journey to the middle of nowhere. The last deal I sent to a bank as a short sale had 17 pages of paper attached. If one piece is missing, not signed or not filled in properly, the bank will not take it any further. They do not call, write, email, or send a homing pegion to tell you you are missing something. They just toss it. You are not the only deal they have to handle. Not by a long shot. That is why the listing agent is so important. They prepare the package that goes to the bank and it has to be perfect.
Now that I have made you feel very confident, I will say there are some excellent deals out there that are short sales and if you have the patience for it, you could end up with a GREAT deal. Good luck.
Always be sure to inquire through your agent whether or not the Seller/Listing Agent is using a professional negotiating service. This is key when it comes to attempting to close on a short sale purchase. At times this might be an added expense to you, as the Buyer, however, the easy way to work around that is to subtract those fees from the purchase price. It is to the Seller's benefit NOT to receive a full price offer. Perhaps that sounds counterintuitive but here is my reasoning; if a Seller receives a full price offer and submits it to the bank, the bank will be inclined to request more money through a counter offer. If, on the other hand, you as the Buyer submit a lower offer (80% - 85% of the list price) the bank will still most likely counter your offer but it will almost always be less than 90% of market value. This creates a win-win situation for both parties; you receive a GREAT deal, and the Seller is able to move on with their life.
If you can help it, always seek out a "pre-approved short sale". The example listed above is where a knowledgable Realtor and an experienced negotiator are key to your success!
Thanks for reading!
Justin W. Richards, Realtor
Managing Partner - Premier Lots, LLC
The $8000 credit does apply for short sales but it will be very difficult to close by the November 30 deadline for the tax credit. My record (here in NJ!) from time of offer until closing is 23 days but this was on my own listing.
My link will take you to a series of posts that will give you a better idea of all the steps and timelines. Too, you are welcome to call me!
Depending on the lender it can take anywhere up to 4-6 months to get it done. Countrywide and Bank of America are jammed and slow, but if you have made a good offer on a house you like and want, be prepared to wait. Many agents put a clause in the contract saying they must close within 60 days of the seller signing the contract. We won't take that kind of offer anymore. It's just not realistic. We have some info on short sales. You may have it by email if you like. You also need to be preapproved or if it's a cash purchase, you must have proof of funds. Your agent will help you with all of that. Good luck
I am assuming you like the property more than others. If you have a FHA financing, you might have problems with REO owned do not want to turn the water on.
NJ realtors wil tell you about a Short Sale Addendum with in MN will "stick" you to the property until Short Sale Approval due date is reach on it happens.
Do you have a Realtor already? Find one! Here are good NJ Realtors for your area.
Buying a short sale can be a long and complex process, it starts when a buyer presents an offer on the property, the offer gets submitted to the bank with all the nessecary documents from the sellers proving their inability to pay their loan infull, the bank takes a while to review the documents and order what is called BPO (broker price opinion) and then start negotiations, the process could be any where from 3-10 months, So if timing is an issue a short sale may not be your best bet. In Plainfield there is plenty of bank owned properties which is a much faster process than a short sale and the prices are even better. If you need help in Plainfield, please give me a call and I will be happy to help yo further.