Casey Lewis,  in Upper Marlboro, MD

Why do banks take so long to approve a short sale?

Asked by Casey Lewis, Upper Marlboro, MD Thu Jan 31, 2013

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Answers

12
I am going through a short sale myself. My realator made sure to put in the contract they have until this date to accept or deny. If they do not counter offer with more time with a time period we can get out of the offer and start looking again. This is probably your best bet.
0 votes Thank Flag Link Mon Jul 25, 2016
Hope you get an answer. We have been waiting since Jan. 25th, 2014. We keep getting the run around. No answers yet. Do they really want to see the house?
0 votes Thank Flag Link Fri May 16, 2014
Banks have to coordinate with investors backing the loan. So the approval has to go through both the lender and the investor. In addition the bank has to send an independent third party appraiser or real estate agent to do an opinion of value. The offer has to be in at a percentage of that value including the purchase price less all closing expenses and commissions.

They also have to review a pretty in-depth package of Seller financial information to determine that there is a hardship that has come about since the owner purchased the home that makes them eligible for the short sale.

On top of this there are thousands and thousands of these processing with every major bank. They are understaffed to handle this.
0 votes Thank Flag Link Thu Jan 31, 2013
Too often 'too long' means someone did not believe the disclosure documents they signed. Those documents said it will take forever if it EVER closes.
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Many home buyers enter the short sale process with improper expectations.
That is the problem.
On Tuesday I closed on a short sale that began on Feb 16 2012. At what point did it become too long? Eleven months is still short of forever.
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In a traditional real estate sale there are seven parties that can kill any deal. In a short sale, this number explodes! Not only the parties currently identified by other agents responding here, but there are the 'other' bulk buyers and investors who are picking the bones of distressed real estate. Let's not overlook that the seller has an end game also, in the event the bank or investor chooses to stall or advance with a shakedown.
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Short Sales should be retitled:
"I BELIEVE IN MIRACLE!" sales.
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When a MIRACLE does happen, every agent involved should get bonuses. That never happens.
Those who have been in short sales for a few years have ceased asking, "Why?"
More often we lament, "Why me?"
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Deserving folks want to buy homes. When the new owner emerges from the closing process, beaming, with their hands holding the keys to a 'miracle' ..... the reward is being a part of the process...of making miracles happen. The same words. "Why me?" express true, unfathomable gratitude for being allowed into the lives of those who trusted us.

Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4041
http://RealEstateMadeEZ.us
0 votes Thank Flag Link Thu Jan 31, 2013
A number of reasons, starting with the fact that most refuse to actually engage with the Seller and qualify them (at least half the sellers attempting short sales do not qualify simply because they in fact do have assets and can repay the loan, they just don't want to) until an offer is made. Once an offer is made the lender requires the Seller to essentially submit a financial application which they then review and there may be items requiring additional information/verification. Then they have to look and see if there are any other lien holders on the property and each and every one of them needs to be contacted and must approve the sale. All of this needs to be done before they can even respond.

Personally my life is too short and my time too valuable to waste it on short sales unless they are clearly indicated as being pre-approved by the lender. Statistically only half the short sales in my area are ever approved by the lender and wasting 90-150 days to find out the sale isn't going anywhere is not a productive use of my or my clients time.
0 votes Thank Flag Link Thu Jan 31, 2013
Hello Casey

All short sales vary in time depending upon a number of factors i.e. numerous liens, the quickness in which paperwork is processed, short sale system utilized i.e. equator. I always tell my clients to anticpate 6 months. Now some short sales happen quickly others have taken over 12 months. A lot of time the banks are providing a service for investors, so final approval comes from the investor. would you be in a rush to collect 1/3 of the investment back?
0 votes Thank Flag Link Thu Jan 31, 2013
In my opinion they have actually come a long way with approving Short Sales. There are several things the Lender has to consider when working through process with the Mortgagor. I actually believe the process is fairly quick. 60 to 90 days is not a lot to ask when everyone is asking the investor to take a note short of what is owed.
0 votes Thank Flag Link Thu Jan 31, 2013
Because they, the banks, are losing money and working to complete the paperwork for the tax payer's to cover the loss.
0 votes Thank Flag Link Thu Jan 31, 2013
The answers below are certainly right. I would add another: incompetence. Bank gatekeepers often screw files up, as do well intentioned real estate professionals (agents, etc) who try to assist the homeowner but don't really know what they are doing.
Web Reference: Http://capitolshortsale.com
0 votes Thank Flag Link Thu Jan 31, 2013
Some banks process are slower than others. The main thing is to get the bank everything that is needed up front. Also other variables are the banks investor or the MI company. That can take a great deal of time to get their approval. I also seen banks approve short sales as quick as 10 days.
0 votes Thank Flag Link Thu Jan 31, 2013
The mortgage company is hoping to cut their losses as much as possible. For example, if you have a mortgage for $300,000 and the house is selling for $100,000 and it goes to foreclosure, the mortgage insurance company may pay the bank $100,000 as the insurance claim. The bank now has $200,000 for the $300,000 mortgage they loaned to the owner.But, they now have the foreclosure expense (average is $60,000) The mortgage insurance company doesn't have to pay a claim if the property is NOT foreclosed. This is one of the reasons why it takes so long. The bank needs to convince the mortgage insurance company that it will cost them less if it sells as a short sale instead of a foreclosure. If the bank can get the insurance money, they won't have as much of a loss as if they foreclose and then the bank is more willing to negotiate.

There are actually more factors too. But this is the main reason they take so long.
0 votes Thank Flag Link Thu Jan 31, 2013
The process to get a short sale approved can be a long one. There are a number of players involved. For one you have the bank, who works for the investor and if you have mortgage insurance you have to deal with them also. To make it even more complicated, if you have a 2nd mortgage or line of credit, you have to deal with them too. Because of some people you have to deal with and the process by which each department has set forth that could stretch the approval time out over several months.
0 votes Thank Flag Link Thu Jan 31, 2013
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