Home Buying in Roslindale>Question Details

Carrows923, Home Seller in Boston, MA

why does it take 2 months to close a short sale home?

Asked by Carrows923, Boston, MA Mon Jun 16, 2014

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The Stephen FitzMaurice Team’s answer
Last year I was looking at the national averages and they were over 1 year to close on a short sale! I think they have come down since then. Wait time exists because the bank has to decide if it wants to accept the loss or not and they take their time making that decision.
0 votes Thank Flag Link Tue Jun 17, 2014
I agree with the other responders. If you consider that a typical purchase takes 30-45 days to close, a 60 day closing for a short sale would be amazingly short. Remember that it's not just between you and the seller, but also involves at least one (and maybe more) lenders who also have to agree. And the lenders would need to agree to let the seller break their contract by selling for less than owed --- that's not easy to do. Two months is a SHORT short sale.
0 votes Thank Flag Link Tue Jun 17, 2014
I would tend agree with everybody else here. some (short sales) can take 1-2 months and others can be dragged out for much much longer.
0 votes Thank Flag Link Tue Jun 17, 2014
I would tend agree with everybody else here. some (short sales) can take 1-2 months and others can be dragged out for much much longer.
0 votes Thank Flag Link Tue Jun 17, 2014
If you are involved in a short sale that will take two months to close, you really should be extremely happy. Be mindful that a short sale occurs when an owner has proven hardship to the lender and can sell for less than owed on his/her mortgage; the owner can accept whatever offer he/she wishes, but the lender decides to accept, reject or counteroffer; short sales are generally by no means fast sales, much will depend on the number of liens involved, who is negotiating the sale on behalf of the owner, timely submittal of required paperwork, etc., therefore, oftentimes much patience is needed...
0 votes Thank Flag Link Mon Jun 16, 2014
It typically takes much longer then that. The length of time depends on the lien holder, number of lien holders, and the seller.

Chris
0 votes Thank Flag Link Mon Jun 16, 2014
Two months? For a short sale?

This would most certainly be the "best case scenario."

Sparing you the gory details, with a short sale you are dealing with the present owner who wants their lender to accept less for the property than is owed on it. Banks are not very quick to accept a loss and move on. A more realistic time frame would be 3-6 months...and then the lender can always reject the deal.

Many buyers knowingly elect to avoid these options and seek others.....

Best wishes,

Bill
0 votes Thank Flag Link Mon Jun 16, 2014
If you close in two months count your blessings, it means the seller was pre-approved by their lender. Right now the average time is much closer to 4-5 months for most short sales.

The reason for the delay is generally two-fold. Most lenders won't take the time to work with the property owner. If and when the property owner contacts them to explore doing a short sale all they get told is, "Bring us a written offer to purchase and we'll discuss it at that time." Then when they receive an offer they start to qualify the Seller which basically means a full audit of all their finances. Roughly half of all sellers are not approved for a short sale as they have assets they could use to pay the bank off and if the bank discovers these then the seller is told, "No, we're not going to approve you for a short sale." This alone can take 4-8 weeks. Assuming the lender finds the seller does meet their standards for a short sale, then they need to research the property itself, to determine if there are any other lien holders on the property. These could include a second mortgage, a home equity line of credit, lens by contractors, tax liens by the IRS, the state or local municipality. Any other lien holders must also approve the terms of the short sale and any one of them can say no at which point the deal won't go through. This can take another 4-8 weeks. Only then will the bank respond to your offer and there's no guarantee that that they will accept it, they may counter the original offer and now you and the bank have to negotiate in the normal manner.

Buyers considering a short sale need to understand that fully half of all properties listed as short sales never get sold, the bank simply forecloses on them. If you're not prepared to take several months with the understanding that even then the deal may not go through, then you should not be looking at short sales.
0 votes Thank Flag Link Mon Jun 16, 2014
Carrows,
2 months would be a dream to most short sales. I've been doing them since 2002 and rarely see them done in 3-4 months. My longest took 19 months, but I've closed all the homes I've ever listed as short sales.
The answer to why so long is up to the banks. Their systems often defy logic and common sense and have frustrated many buyers, sellers and their agents. I did a blog post called The Anatomy of a Short Sale, which may provide some insight into all the moving parts to get to an approval. Best of luck with yours.
0 votes Thank Flag Link Mon Jun 16, 2014
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