Short Sales: How Long Does It Take To Complete Them?

There are many factors that affect the amount of time required to complete a short sale.  The number of mortgages tied to a property is one major factor.  For example, it normally takes longer to negotiate with two or more lenders than it does to negotiate with just one.  The process also tends to take longer when a loan has private mortgage insurance (PMI).  Nevertheless, homeowners have considerable control over both the result and the duration of a short sale.  Success in all cases requires the assistance and participation of the homeowner throughout the process from start to finish.  The actions of the homeowner more than any other factor determines success or failure as well as the time required to complete a short sale. 

Contrary to popular belief, the bank’s decision is not exclusively based on the sale price.  Banks review and evaluate short sale applications based on a host of criteria including the value of the property, the type and terms of the homeowner’s loan, the homeowner’s financial condition as well as the terms of the buyer’s loan.  The amount of time any lender will spend to review a short sale application is not consistently predictable.  In addition, the buyer and the buyer’s lender play an unpredictable yet decisive role in the process.  To complicate things further, lender guidelines vary from bank to bank and foreclosure laws differ from place to place.  Although these various elements make it impractical to accurately estimate the overall time frame, there are concrete steps you can take to significantly shorten the time required to complete a short sale.  The following actions affect the duration of the process: 

Actions That Delay a Short Sale:

·         Submitting incomplete homeowner paperwork or not providing required documentation timely.  When facing foreclosure, time is not on your side—any delay reduces your chances.

·         Overpricing the property.  A property is worth what a buyer is willing to pay for it.  You must put your property on the market at a price that will attract buyers--no buyer, no short sale!

·         Hiring people who don’t know what they are doing.  Banks routinely give priority to short sale applications that have the best odds of closing and discard applications when they are presented improperly or by someone who clearly has no prior experience.

·         Loan transfers.  Lenders often transfer mortgage loans to other banks.  These loan transfers will normally delay the short sale process.  By staying on top of your lender by calling or writing to them frequently, you can help to minimize the delays associated with a loan transfer. 

Actions That Accelerate a Short Sale:

·         Gathering all bank-required documents quickly. 

·         Giving realtors, interested buyers, appraisers and home inspectors access to your property (These people need to get into your property in order to complete and close the short sale transaction).

·         Continuing to pay all other property-related expenses not included in your mortgage payment (i.e. HOA or condo maintenance fees, utility bills etc.)  When these expenses go unpaid, they often become liens against your property making it more difficult to close the short sale transaction.

·         Terminating or not renewing rental leases with tenants.  A vacant property is normally easier to sell than one with tenants.  In addition, when your tenants move out, the loss of rental income will help convince your lender that your financial hardship is valid.

Your bank is not in the real estate business and does not want to own your property.  However, you originally applied to get a mortgage and you must also apply to get out of one--the process requires you to submit documentation just like you did when you bought the property.  Failure to comply with your lender’s guidelines is a recipe for prolonging the process or getting your short sale application rejected.  The best way to speed your path to the finish line is to fulfill all document requirements quickly and completely, price your property competitively, work with experienced people and cooperate with everyone involved in the transaction.