Remember riding in the car as a kid and nagging your parents, "Are we there yet? Are we there yet?" You'll probably feel even more impatient waiting for short sale approval. In all likelihood, it will take much longer than you expect. Most buyers have a really hard time waiting out the approval process.
So, how long is too long? Every short sale is different. It depends as much on the lender as it does on the listing agent. Some listing agents outsource their short sale negotiations to a third party; this can often delay the response even more, but there are a few things you can do to try to hasten the process.
- A short sale can take up to six months to be approved because many factors can slow the process down.
- You might be able to reduce the time it takes to be approved by asking your agent for some information before making an offer.
- Waiting for a short sale to be approved can be agonizing, but the best action you can take is to wait for the bank.
Before You Write the Offer
Ask your agent to do a little groundwork before you decide to buy a short-sale home. They should be able to get answers to some key questions.
What Are the Comparable Sales?
Many banks will discount the price a little from market value, but an offer should be reasonable and close to comparable sales if it's going to be accepted. You might ask your agent to check out the short sale listing agent's track record as well. A poor short sale closing record on the listing agent's part usually means your chances of getting an approval are slim.
How Many Offers Have Been Made?
The listing agent might refuse to reveal the offer prices, but they should disclose how many offers have been received. You might have to offer more than the listing price if multiple short-sale offers are on the property. Find out if the seller's short sale package is complete. Bank negotiators will not process a file if it's missing the required paperwork.
How Many Loans Are Secured by the Property?
The file will probably take longer to close if more than one lender is involved. Some junior lenders might demand unsecured promissory notes from the seller or more money than usual from the first lender. Other lenders will also only consider the first offer. If you're not the first, your offer might fall by the wayside.
Normal Waiting Period
What is "normal" for the waiting period depends on the bank. Some banks get approvals in less than 30 days, while other banks' short sales can sometimes turn around in 24 hours. On the opposite side of the spectrum are other lenders so swamped with short sale submissions, their employees may not respond promptly.
The process is generally as follows after submission of the offer and a complete short sale package from the seller:
|Bank acknowledges receipt||10 to 30 days|
|Bank orders a BPO or appraisal||2 weeks to 2 months|
|The file is reviewed||2 to 10 business days|
|A negotiator is assigned||2 to 10 business days|
|Level II negotiator may be assigned||10 business days|
|File is approved or rejected||30 to 120 days|
Some short sales require additional levels of approval. If a government entity is involved, you should add a couple of weeks to your short sale approval expectations. FHA short sales through HUD typically involve long delays. The process can be slowed if the loan has mortgage insurance that the borrower didn't add.
If you're running past 120 days, it's possible that the listing agent or a third-party negotiator is not on the ball and is lax about calling the bank. Calling the bank often means waiting on hold for anywhere from 10 minutes to an hour or longer—not something anyone would look forward to multiple times.
An especially lengthy short sale period can also mean that the bank has internal problems, a staff shortage, or that it's lost the file a few times; this causes the listing agent to resend the package over and over again. An extended delay can also mean that the appraisal is substantially higher than your offer, and the listing agent is building a case for a new appraiser.
If you see a home languishing on the market month after month as a short sale, it's usually not the lender holding up the sale. The buyer might have canceled, which starts the entire process all over.
Patience Is Key
Unfortunately, you can't always avoid problems on a short sale. One of the hardest things for buyers to understand is that threatening to cancel an offer means absolutely nothing to the bank. It doesn't care about the property's condition, location, repairs you want to make, or an urgent matter. Your best bet—if you truly want the home—is to stick it out and wait.