Home Selling in 80229>Question Details

Cham Gurung, Real Estate Pro in Denver, CO

why short sale houses take longer to close then normal houses?

Asked by Cham Gurung, Denver, CO Tue Apr 3, 2012

If the homeowner does not provide a necessity documents to the bank that he or she wanted to do short sale then it takes longer. Basically homeowner needs to show documentation that they have lost the potential income to carry one the monthly mortgage payment. This is one of the answers and I would like to see here more answers from my fellow realtors. Thank you.

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16
I have found that they don't all take longer. It depends on who the lender is. There are a choice few that are notorious for dragging out the process.Incompetent help and lousy systems. I've been working one recently that has a system that they claim makes the process go more smoothly and quickly. On the contrary. I upload documents to their system that they request and then weeks later they ask for the same documents. I look at the upload file in their system the the documents that I uploaded are no longer there. It's frustrating to say the least.I've then called customer service after no communication from my negotiator and found that one hand doesn't know what the other hand is doing.
I've also had experience with a couple of other lenders who portfolio their loans. Those are a snap. They typically give you an answer within days or a couple of weeks. I think we all know which lenders are the slow, slow, slow, incompetent lenders. Unfortunately, they have the majority of the short sales. That in and of itself is part of the problem.
0 votes Thank Flag Link Sun May 20, 2012
Pratik59,

Short sales are a different beast in real estate. You need a Buyer Broker who is experienced in the 'short sale' real estate business. When you with your agent determine a price and present the offer, the seller can accept or reject your offer. Once he accepts it and the listing agent sends it to the bank, the bank does an appraisal, looks at what the seller owes and then determines if your offer is acceptible to meet what they need to receive. They also often have to get approvals from other secondary lien holders and a Mortgage Insurance Co. That is what takes up the sometimes extended time frame before they get back to you with an approval or a counter offer. They do not have to accept your offer as is. So if you are putting in a short sale offer, fasten your seat belts and get ready to move forward. With short sales, 'patience is a virtue'.

Robert McGuire ASR
Realtor/Consultant
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
Direct – 303-669-1246
http://www.theRobertMcGuire.com
0 votes Thank Flag Link Sat May 19, 2012
planing to buy a sort sale home in nj.. the price is arounf 245000.00 which is the asking price posted. If i accept the offer will the owner and the bank accept the offer.
0 votes Thank Flag Link Sat May 19, 2012
The bottom line is many of the agents and bank negotiators are very inexperienced, or in the worst cases, incompetent and uncaring. It is extremely important to work with a selling agent that knows what they are doing.

I actually have a negotiator that I have worked with for about 5 years who is excellent. Our average time from beginning to end on a short sale is about 4-5 months. Its amazing the difference you get when you have a compassionate and experienced negotiator on your side to keep the bank in check! The banks typically just don't move if you don't stay right on top of them. You also simply can't accept no as an answer. Keep fighting and you'll typically get a positive outcome in a reasonable amount of time.

Best regards,
Matt Barry
Short Sale Specialist
mbarryre@gmail.com
0 votes Thank Flag Link Sat May 12, 2012
A variety of reasons can slow down the short sale process. Examples: Sellers not timely providing the necessary documents, more than one lender involved, an inexperienced negotiator, a listing agent that is trying to learn how to do a short sale, lack of a true hardship etc...I could go and on.

I have had short sales take as little as 2 weeks for approval and as long as 2 years on complicated ones. If you really do your homework prior to listing a short sale or placing an offer for a buyer on a short sale it will give you a good idea of how long the wait most likely will be.
0 votes Thank Flag Link Wed Apr 4, 2012
How about because the lenders want to make sure they aren’t being cheated, that the owner isn’t trying to hide assets or income?
Web Reference: http://jamessimms.com/
0 votes Thank Flag Link Wed Apr 4, 2012
Hello Cham,

Many attorneys/title companies will negotiate for free.
Some negotiating companies (got to check if they are legal) charge up to 3K.
9K - it is unreasonable indeed!

Irina Karan, CDPE
Beachfront Realty, Inc.
IrinaKaran@gmail.com
0 votes Thank Flag Link Wed Apr 4, 2012
Thanks to all for clearing up the conception of short sale more widely. I have seen some short sale houses set in the market over two years and still wants buyer to pay $9500.00 to the short sale negotiator. This is not reasonable in this market.
0 votes Thank Flag Link Wed Apr 4, 2012
I have a short sale listing that's been "under contract" with 6 different buyers over the last 18 months. Many reasons. Buyers have gotten tired of waiting, and have moved on. Why so long? At first it was because B of A had a high appraisal done and they needed to "net" a certain percentage of that. Buyers weren't willing to pay above market value. In addition, B of A would take MONTHS to respond to any offer. Finally enough time had passed and they had to do another appraisal, which came in a little lower, but not by much. Another big issue has been the HOA. Hammersmith Management is TERRIBLE -- they are tacking on attorney fees, late fees, status letter update fees, etc every month. So now the HOA lien is well over $5K. B of A will only agree to pay part of that, so buyer, seller and agents have to figure out who is paying for it. It's a viscious circle.
0 votes Thank Flag Link Wed Apr 4, 2012
And one more complication: bankruptcy. If the owner has declared bankruptcy prior to initiating a short sale or, even worse, while the home is on the market or under contract, the process can be lengthened significantly. And, if there is a second lien holder, might not get approved at all.
Chuck Strauss, SRES, SFR
Your Castle Real Estate
720-318-7598
denverhomeguru@gmail.com
http://www.denverhomeguru.com
0 votes Thank Flag Link Wed Apr 4, 2012
Cham,

Short sales take longer because there are so many moving parts. A lot depends on how things are handled from the beginning. How much and how soon the the documentation is put together to send to the bank along with a 'hardship letter'. The best success I have had is when working with 3rd party Short Sale Negotiators who work with these banks day after day. I have found their contacts, systems and experience, invaluable in the process. As you know, the bank will verify all of the documents and information, evaluate the hardship letter, etc. This can take weeks. And some times this is after asking for the 50-60 pages of info to be faxed to them 3 or 4 times due to losing it, shredding it, or claiming it never got there, or something was missing. A couple of months can easily go by during this process.


Then, after an offer comes in they will BPO (Broker Price Opinion by agent) or they will order an appraisal. If the appraisal comes in higher than the offer and or list price, they may counter the offer or reject the offer and start over. Needless to say it is a frustrating experience for all involved. Once the offer is accepted it still could take several weeks to get signatures from the bank and close. Closing figures need to be in at least 72 hours before closing. If not, they will threaten to close the file and start over or let the home go into foreclosure. And sometimes that is exactly wwhat they do. Finally, to answer your question, I have seen this process take as much as six months to a year to play itself out. Often with the original homeowner still living there without making any payments. There have been some new laws put in place recently that are intended to speed up and simplify the process. I will believe it when I see it.

Robert McGuire ASR
Realtor/Consultant
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
Direct – 303-669-1246
http://rmcguire.yourcastle.org
0 votes Thank Flag Link Tue Apr 3, 2012
Hello Cham,

Short sales take longer because there is a 3rd party involved in them - the short sale lender has to approve the short sale, after buyer and seller agree and sign the contract.
The seller has to be approved (has to have a real hardship and the house has to be upside down).
The house value should be confirmed by a bpo or appraisal.
The liens, tax delinquencies, code violations by the city, 2nd mortgage (or a 3rd mortgage) have to be negotiated. The property might be sold in a bad condition and only for cash because of that.
The buyers might get impatient and walk...after several months of waiting, so you'd need to start over.
Often, the short sale lenders are disorganized and they loose important documents...so you keep on sending the same docs over and over again. The buyer may not get a mortgage...I could go on.

But, even though short sales take a long time, the gratification of helping a person out of one is pretty good...so, in the end, it's worth it, to me.

Irina Karan, CDPE
Beachfront Realty, Inc.
IrinaKaran@gmail.com
0 votes Thank Flag Link Tue Apr 3, 2012
If there is PMI insurance on the mortgage it could take longer to close a short sale.
0 votes Thank Flag Link Tue Apr 3, 2012
There are sooooo many more layers of approval, especially if a 2nd mortgage is also involved. And, it isn't must the lien holders that must approve. Whoever the investor is that purchased the loan, also needs to bless the transaction. And on the first tier of approval, the negotiators for the lien holders have miles of piles of files. Sometimes the files fall through the cracks. Then if it's an FHA loan, well, then you get the goverment involved. Nuff said on that one.
0 votes Thank Flag Link Tue Apr 3, 2012
More than one lein holder can take longer to process.
0 votes Thank Flag Link Tue Apr 3, 2012
Using a third party negotiator could make the short sale take longer to close.
0 votes Thank Flag Link Tue Apr 3, 2012
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