Under new guidelines issued for Fannie and Freddie Mac backed loans by the FHFA (federal housing finance agency) , that I believe went into effect mid-June this year...
"The guidelines would require servicers to acknowledge receipt of short sale purchase offers within three business days; respond to short sale requests within 30 days (with a possible 30-day extension); and make a final decision within 60 days of receiving purchase offers."
From what I was told, the lender must follow the guideline of approving the seller to go through with a short sale (sellers have to prove hardship to the bank and request a short sale) within the 30 days and approve the actual short sale offer within 60 days.
HOWEVER, and this is a big however, if the short sale packet initially submitted to the bank is not complete, the lender can take more time (according to the "guideline" an additional 30 days) until they have all the paperwork to review and approve a short sale transaction to occur. In addition, since the banks have the right to counter-offer a buyers purchase offer, if the buyer or the seller/buyer agents involved are slow in responding (meaning the buyer is slow in agreeing to increase their offer to match the bank counter-offer, or the sellers agent doesn't get the paperwork to the bank in a timely manner), this can also increase the time frame.
Despite the name, a short sale is NOT short by any means. It's imperative that you as a buyer have an agent who is familiar with the short sale process, and even more important that the sellers have a agent who is familiar with it as well, and is ready to be diligent in contacting the bank on a weekly basis, even if just to find out where the paperwork is in the maze of bank employees reviewing the offer.
Remember, banks are currently inundated with these types of sales, are short on staff (even though they have increased their workers to handle the volume of short sales.) Each packet (which can be hundreds of pages) must be thoroughly reviewed before a short sale is approved.
For some more information on how the process works, please read my blog:
The issue is not just submitting it to the bank. The reasons bank may take longer is
The seller has to have all his paper work in order and submitted to the bank 1st.
Also the seller must qualify for t he short sale.
Most buyers don't seem to understand that the bank has the final say in the price but the seller must cooperate for sale to happen.