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Janie, Home Buyer in Alameda County, CA

Quickest short sale response from bank? Do agents know if a ss will go through before submitting final offer?

Asked by Janie, Alameda County, CA Mon May 11, 2009

Hello, we placed an offer on a short sale in the greater bay area, the owner of the house accepted and signed our initial contract, now it goes to the bank for approval correct? The sellers agent mentioned that they are pretty sure we got it locked down. Also we sent off our pre-escrow money, and assume it will be cashed by the title company very soon. Can agent's know that the ss will be approved by the bank before hand if they have a good relationship with the bank? What is the fastest turnaround for an approval and closing have you seen for a short sale? Thanks in advance!

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Hi Janie,
What I would suggest is before you commit your deposit to this short sale, I would ask the following information:
1. How many loans are against this property? What are the balances? Which banks are they?
If you can post this information back, we'll be able to give you a general time frame and expectation to the short sale. The agents that have responded to you already have lots of experience working with a variety of banks in negotiating short sales so we can share with you on average what our turnaround time has been with each bank and what you can expect.
The other important piece of this short sale is finding out if there is a second loan against the property and what the balance is. Most 1st lenders only allow $3000.00 to be paid to the 2nd lender as a settlement and that's it. If the 2nd lender requires a settlement amount larger than the $3000.00, you may have a deal killer. I can share with you that my experience with 2nd lenders is that they want 10pct of the loan balance as a settlement.
Your agent can obtain this information from the listing agent. Good luck!
1 vote Thank Flag Link Wed Jan 5, 2011
There is no definitive guideline to when the bank will have a response. It depends on if there is one loan or two, if the home owner has all their documentation together or not.

I commend you for submitting your deposit to escrow. This is not common, however it does make the seller feel more secure in their choice of you as a buyer. Frequently the buyer buys something else and then the short sale process starts over.

I've represented over 20 sellers in the past 3 years and I am now recommending that they ask for a escrow deposit. Don't do inspections or anything that is non-refundable until you get your approval.

Be patient - it may take a while. If this is the house you love, and if it was priced according to comps, you're patience will be rewarded by being the owner of a great home.
1 vote Thank Flag Link Mon May 11, 2009
Janie:

It is most unlikely that the home you are buying has an FHA loan on it. In California, especially in high priced areas like the Bay Area, FHA loans were not even a consideration up until recently when prices plummeted and FHA initiated the Jumbo FHA loan. Marla's link to the FHA short sale information may be interesting, but almost certainly will not be relevant.

Regarding "relationship with the bank" and its effect on the timeline for approval. Unfortunately, no matter how many deals you do, the players and rules change from one short sale to the other these days. Parameters used to approve a short sale 60 days ago no longer work at many of the lenders. What was good for Countrywide in February is no longer applicable now that they are B of A. What was good at WaMu last year is no longer applicable now that they are Chase. And with the government getting involved, and the banks holding out to see how it will affect their portfolios, short sales seem to take longer, rather than less time.

And, two questions for you. Why have you sent off your deposit to escrow? Did you execute a Short Sale Addendum? That document allows you to delay all your timeframes until the Short Sale lender has actually accepted your offer. Since there is no guarantee in a short sale, this makes fiscal sense. You do not want to be ordering appraisals, opening escrow, incurring costs, etc. until you are 100% sure the lender is going to approve the short sale. And even if the lender approves the short sale, they may impose terms that the seller cannot comply with. A recent short sale approval from B of A included the requirement for my seller to waive his rights under is non-recourse loan and allow the lender to sue him in the future for the shortfall on the sale. He has decided that he is better off in foreclosure where the shortfall will have to be written off, by law, rather than opening himself up to never knowing when the bank is going to come after him.

Now that all the cautions have been given, and a horror story too, let me reassure you that a short sale, handled by an experienced listing agent, has a better than average chance of going through. Recent timelines have ranged from 30 - 90 days for approval. The lenders will usually give you 30 - 45 days to close once they have issued the letter of approval (which will be needed by the title company to be able to insure your title). So, if you really like the house, hang in there. Patience and perseverance are a must in the short sale game. Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
http://shel-lee.listingbook.com
1 vote Thank Flag Link Mon May 11, 2009
Most agents go by comps in the area. Or BPO ( Brokers Price Opinion). When I represent a buyer in a short sale I do not have the buyers put in money into escrow until the bank has approved the short sale. And I always put that term in the contract. Good luck. I hope you get the home. Happy New Year!
0 votes Thank Flag Link Wed Jan 12, 2011
Janie, there are a number of factors that determine how long it take to get a short sale approved. I have gotten an approval in one week. Other times it has taken four months. Who is servicing the loan is one factor. If it is Bank of America or Chase it most like will take months not weeks. If it is Wachovia it can occur very quickly. Another thing that can speed up the process is if the seller is using the HAFA process. This means that the seller first attempted to do a loan modification via HAFA rules but was turned down. There are specific turnaround times that the banks must meet on HAFA short sales.

Another consideration is who is the investor. Even though BofA or Chase may be servicing the loan it is probably owned by someone else, most likely Fannie Mae or Freddie Mac. These organization sometimes take a long time approving the short sale if it falls outside of normal parameters.

The advice I give to my short sale buyer clients is that they should plan on a short sale taking four to five months to complete. Hopefully it will take less time but if you plan on the four to five month time frame you won't be disappointed.

One last consideration, there are many real estate agents who list short sale homes but have no idea of how to get one done. If your agent does not know the agent representing the seller it is good to find out how much short sale experience the listing agent has. Do they keep you informed as to the progress. Many times there will not be anything to report but a good agent will keep in touch and keep your agent updated on progress. I wrote a short sale book that I can send you. It will help you understand everything you need to know about short sales. Drop me an email if you would like a copy sent to you.
0 votes Thank Flag Link Thu Dec 9, 2010
I wish we knew. It would take much stress off us and our clients both. Unfortunately, even with a working relationship with a bank and even specific people each transaction "sits in line". The only way to get a faster turnaround is to luck upon a house that almost closed and make an offer, get seller's approval, and listing agent to submit and push it along. (Sometimes it's quicker but even that isn't always faster.)
0 votes Thank Flag Link Mon Oct 11, 2010
Janie,
WOW ! My advice to my clients is only make an offer on short sale properties that had a bank approval that fell apart in escrow.
Show me the money...or the bank approval letter and pay close attention to the date.In some cases the Negotiators name and phone # is on it for verification.The Listing agent can sit with the buying broker/agent while talking to the Lenders Negotiator FOR CONFIRMATION.
EXPERIENCE IS THE KEY and depending on who the bank is,how many loans,If there is a sale date,etc...
As a Broker I dealt with many banks and 2 stand out to be the most difficult ...Stay away!
The inventory changes daily and there are great deals...ie some are giving 3.5% back for closing credits
Some are Flip properties that are remodeled and in move in condition ...BANKED OWNED that are as is.
Finance make a big difference too..Conventional,FHA,VA,etc.= Options...Good Luck.
0 votes Thank Flag Link Mon Oct 11, 2010
Janie, can you tell me what ever happened with the house you were in contract for? Did you ever get it? If so how long did it take?
0 votes Thank Flag Link Tue Sep 22, 2009
Janie, can you tell me what ever happened with the house you were in contract for? Did you ever get it? If so how long did it take?
0 votes Thank Flag Link Tue Sep 22, 2009
As Susan has mention the bank doesn't have any definite time of reply, the quickest short sale experience that I had was 3 weeks. Meaning the Bank accepted the offer or they replied in 3 weeks. Then it went to the loan process for another 3 weeks.

It all depends on the negotiator or your Realtor. If he has contact to the banks' Loss Mitigation Department, then it might get faster. However, expect 4 to 6 weeks. Also, If the Short sale package is incomplete that is when it will take sometime, since, the bank might request to resubmit the documents again, the complete package.

The agent will not know ahead of time if the offer will go thru, or not. It still depends on the bank. What I ussually tell my clients is to keep looking and keep sending offers, since we won't know maybe you have other competition and if their offers are better that yours, then they might get the deal.
0 votes Thank Flag Link Wed May 13, 2009
The shortest response time I have had on a short sale approval has been 2 days. This is rare, yet can occur. There are variables that affect response time. Primarily it is the bank approving the short sale that dictates how quickly or slowly a ss is approved.

In some cases a listing agent can know if the bank will approve the short sale. Particularly if it is a FHA short sale. FHA has guidelines regarding the terms on offer price that will be accepted at differing time periods of a listing. See the HUD preforeclosure information to get the ratios of what a FHE lender will accept on a short sale.
0 votes Thank Flag Link Mon May 11, 2009
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