How long does it take to close on a short sale property?

Asked by Chris, Zephyrhills, FL Mon May 7, 2012

My husband and I are looking to purchase a home in the next year just wanting to know how long the procees takes from bid to close on average

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Pamela Cohn, Agent, Clearwater, FL
Mon May 7, 2012
Short Sales are Anything but Short! And you Better know what YOU are getting into. Before looking at the Buyer's pespective, you must understand the Sellers position. For all intents and purposes, short sales, foreclosures & pre-foreclosures are all the same. The owner needs to sell & they owe more than the house is worth. Therefore they need the lender(s) approval to sell "short".
Now lenders don't do this out of the goodness of their hearts. Lenders are looking to cut their losses. Which way will they lose less, a Short Sale or a Forclosure?
Sellers can't just do a Short Sale because their property value dropped and they want out. They have to qualify. There must be a real hardship-such as a loss of job, death of partner, major illness AND the Seller doesn't have other assets or financial options. They must also be willing to complete a full financial package for the lender proving it.
House + Mortage+ Promisary Note (=Debt)
Let me make this very clear DEBT DOES NOT DISAPPEAR!
Florida is a recourse state. When a lender releases a Mortgage it merely means they are releasing the vehicle that secures the NOTE to the house. With the mortage released, they can sell the house, but the note is still there. It just doesn't have the house for collateral. A licensed Mortgage broker & an attorney can legally negotiate the debt. The attorney's task is to negotiate the debt down as low as possible.
Many banks are trying to streamline the process. Part of the problem is every lender has different requirements. IF there is only one lender & the seller qualifies the chances of closing are good. Two lenders or a lender and an HOA and the chances go down...3 or more liens...Buyers you should RUN!
What does it mean if you are the Buyer? Sit down and have a consultation with your Professional Realtor. If they don't do this...maybe you should find one that does.
Make sure your agent checks out the Short Sale before you even go looking... remember 3 or more liens...what do you do...RUN!)
If you have time contraints, you must be in a home by a certain date...don't do a Short Sale!
Once you and the Seller agree on terms and have a ratified contract it will take the first lender 45+ days to respond. Most lenders want agents to put 90-120 days in the contract. If it closes in 2-3 months, that is excellent. It could be 6 months plus AND even with a FULL PRICE offer the lender may come back and counter with higher OR just say NO. There are no guarantees. The Lender may get more if they foreclose and collect mortgage insurance & then sell it themselves.
As far as is based on market value. Lenders were looking to get 88-93% of market we are seeing many want 93%+ even closer to market value.
Once the first lender agrees, the process begins again with the second lender..who usually doesn't get more than $3000 compensation regardless of the loan amount....which is why the 2nd lenders are often the deal killers. Sometimes the seller is the Killer...they may have been living in the house for a year or more paying nothing & maintaining nothing, the lien holders agree, but won't negotiate the debt down to zero, thus the Seller backs out of the deal. The Buyer might not find this out till 6 months down the road..Short Sales are like raffles..You MIGHT be a winner.
Everbody wants a deal...what do you do as a Buyer? Don't limit your this BUYERS MARKET...the market value IS an "On Sale" price, whether a Short Sale, REO or regular priced house with a motivated seller.. REMEMBER a short sale is anything but Short!


Pam Cohn
Broker Associate, GRI, SFR, NHS
Real Estate Consulting, Marketing & Sales
Prudential Tropical Realty
2539 Countryside Blvd #3 Clearwater, FL 33761
1 vote
Is there a required legal timeframe for closing to occur from date of approval? I'm the seller and got approval on May 15th but buyer is stuck waiting for association approval and they claim if we do not close in the next 5 days, they will rescind approval and issue a denial letter... What are my rights here?
Flag Tue Jun 21, 2016
Lawson Real…, Agent, Park City, UT
Mon May 7, 2012
It all depends on the Bank and the experience of the Realtor. I always suggest using a CDPE, Certified Property Distress Expert. As a CDPE myself, I closed the average short sale last year in 57 days.
1 vote
Alma Kee, Agent, Tampa, FL
Mon May 7, 2012
Hi Chris,

One thing to remember is the listing price is "ficticious". So if you see a "bargain" priced Short Sale, it doesn't mean you can actually buy it for even tens of thousands above the asking price. You see, the Seller decides what price to list it at. Until/If the underlying lienholder does an appraisal to determine value, you will not know what price you MUST pay to buy the property. For this reason, you will often see Short Sales come back on the market once the "real" price is known. The buyer at the "bargain" price will realize it's no longer a bargain and will back out. Then the next "retail" buyer can get a contract.

The VERY best bargains are if you have ALL CASH and are a risk taker and willing to do a lot of homework and buy a property without a clear title at the courthouse foreclosure auction.

If you don't have ALL CASH and/or aren't willing to go a very risky route, then you must line up with all of the other "retail" buyers. To capture the very best deal available to "retail" buyers, you need to be able to see past ugly worn out homes that are also quite filthy, too! If you have limited cash, you can still end up with a model perfect home by taking advantage of the FHA 203K Fixer Upper Mortgage or on Fannie Mae owned homes, the HomePath Renovation Mortgage. You will have a contractor come in and renovate the "bargain" priced home soon after you close. Take a Look at Property Brothers on HGTV to see their fabulous transformations. It will inspire you!

Good luck!

All the best,
Alma Kee
1 vote
John Lutzo S…, Agent, NEW PORT RITCHEY, FL
Mon May 7, 2012
I guess I could send you a long e mail just like the other agents but its better to just say. DITTO. It could be 2 months or 6 months. it depends on the bank and who is doing the negotiation. I have been doing them since 2007. Some easy some hard. Patience is the key
1 vote
Linda S. Cef…, Agent, Franklin, WI
Mon May 7, 2012
Unfortunately, there is no average. I've seen them close in less than 30 days or as long as never. One of the most important things you can do to safeguard yourself is to work with an agent that has experience in short sales and ask them if they know the agent representing the seller. If the seller's agent is inexperienced it can be a true nightmare.

Make sure you sign a short sale addendum and have all of your dates and deadlines run from the time the bank accepts the offer, not the seller.

Best of luck on your purchase.
1 vote
Linda S. Cef…, Agent, Franklin, WI
Sun Mar 17, 2013
Well.........I was about to chime in until I noticed that this question is nearly a year old.
0 votes
Catina Willis…, Agent, Plymouth, MI
Sat Mar 16, 2013
A short sale is subject to third party approval and the third party is the loan lender (i.e. Bank of America). Unfortunately, there is no straight answer to how long it takes to buy a short sale because the process requires various steps.

My advice would be to consult a local REALTOR who's "SFR certified" if you are planning to sell. SFR certified REALTORS can help prevent avoidable delays when buying or selling a short sale. The website serving Detroit and suburban areas frequently posts answers to these types of questions. You should visit it frequently to learn new guidelines
0 votes
Ronnie Bramer, Agent, Fort Thomas, KY
Mon Dec 31, 2012
Every agent agrees the time frame is really up to the bank and the seller's personal history and response time.
The best question is what is your time frame ? can you afford to wait 2-6 months for the house you may really want ? what back up plans do you have ?
you may want to target a few different properties . As a buyer you wnat to remain in as much control as possiable and not leave yourself open to someone else's time frame.
0 votes
Alma Kee, Agent, Tampa, FL
Sat Dec 29, 2012
Forgot to answer your question... on a Short Sale you normally MUST close within 30 or 45 days of the approval so it's possible you may have to close within 45 days or it could take 6 months or a year or it may never close. There is no "planning" a closing date with a Short Sale--you must be able to close right away or sit and wait for months on end. And.. as mentioned earlier the list price may not be in the realm of possibility so don't get excited that you will get a bargain. The lender will hire an appraiser/realtor for a valuation and then the "required" price will be known. Lately I'm seeing above market "required" approved short sale prices. I'm in the middle of a dispute right now where the house is truly worth $350k max and the lender is requiring $400k!

A lot can go wrong with a short sale. You could even be kicked out of the contract if the Seller decides to simply draw out the process by delaying submitting bank statements and pay stubs, etc., because normally the Short Sale addendum expires after a few months. If the Seller doesn't extend your contract then you don't get a chance at the house. It doesn't happen often but it is yet another peril in the wild, wild, world of Short Sales.

Also don't forget an owner may realize how expensive it is to rent nowadays and simply do a Deed for Lease with the lender to stay in the house for the next 3 years.
0 votes
Johannag79, Home Buyer, Saint Petersburg, FL
Fri Dec 28, 2012
My husband and I started the short sale process on April 16 2012.We are still awaiting for a closing date...the short sale could take up to a year or less. Every case is different.. We hope to close soon. Good luck to you and your husband.
0 votes
Stephen McRo…, Mortgage Broker Or Lender, Tampa, FL
Sun May 20, 2012
OM Gosh, do yourself a favor and avoid the Short Sale (a,k,a, Long Sale) Clown Car Full of Horrors if at all possible! They all will tell you they have already received an approval before you contract for a 10 month hope to gain that takes a nose dive in the end!

Stick with re-sales and foreclosures! Long Sales are no great bargan as the banks are demanding the same market value as other homes after the 10 months you'll spend waiting for one as the bank askes for new BPO after BPO, raising the price along the way! Tampa
0 votes
Connie Mitch…, Agent, South Padre Island, TX
Mon May 7, 2012
And I agree with Pam! Short sales are anything but short! Finally closing 2 recently, one took close to a year to close and the other about 6 months. They were equally frustrating, but if you are patient and can hang in there for the duration, you will walk away with a heck of a deal!
0 votes
Ruth and Per…, Agent, Los Gatos, CA
Mon May 7, 2012
Hi Chris

The answer is 6 weeks to 6 months if lucky.
if not then 9 months to 12 months.

A lot depends on Number of Lenders, and whether same or different.

How many short sales and REOs in the pipeline being handled by the Asset Manager,
bank and other banks.

What are the inventory levels by Locale, Town, City etc.

Banks do not want to flood the market.

Good luck.
0 votes
John Edwards, Agent, Saint Petersburg, FL
Mon May 7, 2012
That is the million dollar question to which there is no specific answer. The amount of time will vary depending on how pro-active the mortgage company is, as well as how responsive the owner is to requests for additional information. I've had some short sales take as little as 45 days and one that we just closed, that ended up taking 2 1/2 years from start to finish.

If there is 2nd mortgage the approval process is more complicated since they have to approve the amount they are being offered by the 1st mortgage company and or what they require extra from the owner. We just had a short sale fail through after 3 months due to the 2nd mortgage (Regions Bank) requiring the owner to pay an additional $21,000 out of pocket and they would not negotiate that amount. The seller basically told them to stuff it.

On the average I'd have to say 3-4 months from start to finish. The good news is that Short sale closing are getting shorter as the banks are more organized in their approach.
We can only hope it continues in that direction.

Short sales are still an excellent way to get a good price on a property as many people shy away from trying to tackle them thus keeping the competition down and allowing them to remain on the market for sale.
However, if and when the bank responds you (prospect) have to be ready to perhaps pay more than you offered as the banks seem to be coming back with counter offers higher than the offered amount.
The counter offers from the banks seem to be coming back at reasonable amounts for the current market conditions. Don't expect to get them at a low ball steal any longer (at least in our area).
0 votes
I will back you up on your last point. I pulled the comps to see the short sale solds in a swath across mid pinellas left to right and properties listed for $100k and less sold at most 10% below asking price. Some sold within $5000k of the list price but the majority sold just a few thousand below the list price or right on it. The less the price the closer you have to come to the list price. It stands to reason, higher priced properties have more "leeway".
Flag Mon May 7, 2012
Barry Smith, Agent, Saint Petersburg, FL
Mon May 7, 2012
If you decide to go for a short sale property, decide from the get go that you are going to see it through. There are guesstimates of how long it will take but no one can tell you exactly how long. Be prepared for the long haul. Many buyers just get tired of waiting. If you have a time line of when you have to be in a house, then a short sale is not for you. Bank Owneds or REO ( Real Estate Owned ) properties do take less time; but again, there are no guarantees as to how long.

Like Liane said below, don't limit yourself to short sales. There are many properties on the market that are priced competitively to short sales. Don't overlook them; plus, you can close much more quickly.

Lastly, find ONE great agent and stick with them.
0 votes
Steve Capen, Agent, Saint Petersburg, FL
Mon May 7, 2012
On average the process takes 2-4 months to get a short sale approval, then the buyer usually has 30-45 days to close the transaction.
0 votes
Liane Jamason, Agent, Saint Petersburg, FL
Mon May 7, 2012
Could be anywhere from 3 to 9 months in my experience - a lot depends on the listing agent's short sale experience and the preparedness of the Seller with paperwork. My thought is don't limit yourself to only looking at short sales. Many regular listings are just as competitive in price right now.…

Liane Jamason, REALTOR
Smith & Associates Real Estate
0 votes
Sarah Goulart…, Agent, Plymouth, MA
Mon May 7, 2012
As Linda says, there is no average. It depends on the bank, the number of banks involved, who is negotiating the short sale, and so many other factors. When I have a buyer interested in a short sale property I tell them to plan on 4-12 months and that there are no guarantees.
0 votes
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