Question 1: How long does a short sale take? There is no single answer. Some factors that may or may not impact the time for a short sale includes: number of loans on the property, readiness of the seller to submit their paperwork to their lender(s), the lender (some banks are more efficient than others), who is servicing the loan (the bank or another party), fair market values in the community, acceptance of the buyers offer by the lender(s), etc. I had one short sale accepted by the sellers bank in 2 business days followed by a 30 day escrow. My longest short sale was over 7 months for the lenders acceptance and then a 40 day escrow due to the holidays. Most short sales are somewhere in between. And a few go longer.
Question 2: What are some pitfalls? 1. Buyers making a "low ball" offer. Buyers should work with their real estate agent to make a reasonable offer that the sellers lender will likely accept. Remember, the banks do their own market analysis and usually will not accept an offer just to close a transaction. They want to receive a fair market price. 2. Buyers running out of patience and giving up on the transaction without their agent notifying / communicating with the listing agent. 3. Buyers and their agents not talking regularly. Even if the conversation is to say there hasn't been any progress this week. Email or call your agent every week (or, ideally, your agent should call you!) And ask your agent about conversations / emails she / he has with the listing agent. Communication is key. 4. Losing confidence in your agent or the listing agent. Remember, everyone wants you to be able to buy the house and will not intentionally cause any delays. 5. Not being flexible. Short sale transactions don't always proceed the way a "traditional" sale would proceed. As the buyer, if you can be flexible, and occassionally put yourself in the shoes of the family who is "losing" their home, you will probably be more successful. 6. Buyers not being ready to get their financing, etc., once the lender acceptance is received. Buyers need to master the "hurry and wait" concept, with the "hurry" part coming at the end!
Naturally, not all situations are the same, and some of my comments above are not relevant to all short sale transactions.
Alain Pinel Realtors
Trust a good agent to "suss" out the situation and speak with the agent and find out which one of these the short sale is
Make offers on multiple short sales even if they have offers if they are homes you want. It costs you nothing and you are more likely to get a home
Be prepared to spend money on deferred maintenance. Location is most important
List price on a short sale is not even close to what the home may or may not sell for
be prepared to wait a long time or you might get lucky -- leave the details to a professional
A brief summary of the process, in the simplest case, where there is only one lender or lien holder is: When buying a short sale, the offer is made to the listing agent for the sellers.
If the sellers accept the offer, the offer is then submitted to the short sale lender. The short sale lender will make the decision whether or not to accept less than the amount owed to the lender.
If the short sale lender is willing to consider accepting less than the amount owed, the short sale lender will then hire one or more people (usally real estate brokers or real estate agents) to provide their opinion of the Fair Market Value of the property. (known as a BPO or Broker Price Opinion) Some short sale lenders require 3 or more Broker Price Opinions, not just one.
The short sale lender will either approve the offer by the buyer, reject the offer by the buyer or make a counter offer to the offer made by the buyer.
If there is more than one lender or lien holder, the process becomes much more complex, because we now must get the approval of all of the lienholders, not just one. I have closed short sales with as many as 4 lenders and lien holders, but when you have to get agreement from that many parties to accept less than the amount that they are owed, the process becomes very time consuming, complex and and frustrating. If any one of the lien holders refuses to accept less than the amount that they are owed or refuses to accept the amount they are offered, the short sale fails.
Charles Butterfield MBA
Real Estate Broker/REALTOR
Cell Phone: (408)509-6218
Email Address: firstname.lastname@example.org
The biggest pitfall to avoid is submitting an offer on a short sale that wonâ€™t go anywhere, so the biggest asset that a Buyer can have when it comes to purchasing a short sale is a Realtor that is familiar with understands the short sale process. This way your Realtor can evaluate the sellerâ€™s position (number of lien holders, reason for selling, status of foreclosure), as well as the listing agentâ€™s knowledge of short sale transactions, upfront in order to determine the probability of success.
Having the right expectations of how the sale process will occur is, in my opinion, the most important key to the transactionâ€¦remember, a buyer is submitting an offer to purchase the sellerâ€™s home subject to the seller receiving written approval to sell his house for less than what is owed to his mortgage holders. If the buyerâ€™s offer is accepted by seller then a binding contract is formed and the buyer has agreed not to breach such contract while the seller negotiates with their lien holders for such approvalâ€¦this time period is know as the â€œshort sale contingency period.â€
Once a buyerâ€™s offer is accepted by seller they have committed themselves to the sale until the expiration of the short sale contingency period. So please, DO NOT make offers on multiple propertiesâ€¦this is considered a breach of contract and is very unfair to the seller. It could also lead to possible claims against a cancelling buyer, especially if the seller is relying on the buyerâ€™s offer in order to avoid foreclosure.
Remember, the short sale process is a balancing act between the buyer and sellerâ€¦communication and trust between the parties is very important. The buyer should feel confident that if their offer is accepted that the seller will cooperate with their lien holders and that the listing agent will be able to negotiate a successful short sale approval. And, as the seller could be relying on the buyerâ€™s offer in order to avoid foreclosure, the seller should be confident that the buyer chosen is both committed to seeing the short sale through to the end (or at least to the end of the short sale contingency time period) as well as qualified to closing the transaction once the short sale approvals have been negotiated.
Intero Real Estate
Dre # 01125380 since 1991
Keller Williams Realty
There is a VERY good advisory called the Short Sale Advisory that really explains a lot of the in and outs of a short sale. It was designed to educate the buyer and seller about the process. I can get a copy of it for anyone that is interested in reading it.
Short sale timing can very greatly as there are many factors that affect how and when the short sale lenders will respond. Talking with a knowledgeable Realtor helps on this.
One good designation to look for is a CDPE (Certified Distressed Property Expert). They get great training on this subject. You can find out more at http://www.cdpe.com
Pat Chadwell, broker
CRS, SRES, CDPE, CIAS, ePro, SFR
Realty World - Residential Specialists
408-927-6565 x 11