How Long Does a Short Sale Take?
What is a Short Sale?
Purchasing a home or real estate for which lender willingly accepts less than the amount which is owed on the mortgage.
Real estate markets are flooded because of short sales, and the ratio tends to exceed in the future.
There must be two things that are true if the sale is a short sale;
- The homeowner is unable to make payments for several consecutive months
- The housing market collapses, resulting in making the worth of house less than the remaining mortgage balance.
Falling behind the payments can result in foreclosure. To avoid this, both-the homeowner and the lender-agrees to go for a short sale instead. The homeowner takes a step to sale their house. Buyers potential enough to purchase the home make a deal with the homeowner during the process of a short sale. But here’s something significant which everyone needs to know:
The process of a short sale cannot begin; until the lender considers, reviews, and approves the details of a short sale process.
Homeowners usually prefer a short sale because it is voluntary and not forced.
How Long Does a Short Sale Take?
It’s a matter of weeks, only if you are patient and persistent.
When it comes to paying the mortgage, financial circumstances can be a hurdle and conspire to hit the homeowner, resulting in making them unable to keep pace with the monthly payments. Knowing that one has to sell your home less than it’s worth gives pain to the owner and that pain is termed as a “short sale.”
Sing the Blues
Because different areas have different short sale duration, the homeowner and lender have to go through its extensive process. Mind you that the process duration varies, and typically it might take four months or longer.
TimeLine of a Short Sale Approval
Here’s the process of a short sale timeline, which will give you an idea of how long the process can continue.
Document Collection: 1-3 Weeks
Once the potential buyer is secured for a short sale, the process begins. The first process is the collection of documents where you have to provide all the relevant documents necessary for a short sale, including; listing agreement, lender approval, etc. All the collected documents will then be received by the lender, including the purchase contract, and (s)he will review those documents.
Valuing Property: 1-3 Weeks
After collecting all the relevant documents, receiving, and reviewing it, the lender appraises your property. The lender, after evaluating will then, order an appraisal or BPO (Broker’s Price Opinion) from an appraiser or a real estate agent. This valuation is performed, and the result is sent to the lender.
Negotiations and Approval: 2-4 Weeks
After receiving the value of the property, the lender reviews the purchase contract. Based on the agreement, the lender is authorized to accept, reject, or counter it. Then comes the part where the lender determines the acceptable fees of the contract. Depending on the net proceeds to come at an adequate level, the charges might be negotiated many times. Once each party agrees and accepts the terms, the investor will sign on approval.
The Approval: 4-6 Weeks
After going through the process, your file gets approved, and the process for a short sale will move forward. As the time-frame is limited, the buyer performs appraisal, inspection, or other procedures (if not already performed).
Exceptions and Potential Delays
You have read how the process of short sales works and how long it can take but, it’s not the case always. Since every process has diverse possibilities, your short sale process can be delayed due to several factors.
1-4 weeks: Multiple Lien Holders
In the case where junior or multiple lien holders are present, all of them will have to agree with each other for the short sale process to happen. It can be an added hassle and time-consuming.
2-4 Weeks: If the Buyer Quits:
There are times when the buyer does not perform to its fullest, is lost, or quits during the short selling process. A new buyer needs to be found in this case, as the process cannot proceed further. However, it will take comparatively less time if documentation is ready, and the valuation is performed.
BPO or Appraisal Dispute
Often, the BPO or appraisal turns out to be unexpected, and it can take an extra two weeks. The majority of buyers, in this case, wait for BPO to expire (duration to expire in 3 months) before they consider a new BPO.
The Most Significant Part; Rejection
It is all glitters and gold until your file is rejected. Rejections do happen, and the reasons can be as follows;
- Buyer offers less
- Frustrated buyer
- Any document(s) is missing
- Demands of the lender are excessive
- The buyer quits or walks away
- Multiple lienholders who do not come to the point of agreement
Patience is What You Need
Unluckily, the problems might occur, and you cannot avoid them. We know patience is bitter, but it is the only key to help you through the process of a short sale and to keep you calm.
Having said that, a short sale is a time-consuming process, and you have to wait and stick to it to avoid foreclosure or any other mishap. To make your short sale successful, you have to take immediate action and take help from the right ones if you are facing any confusion or trouble.