The first question you hear out of the mouths of buyers looking at short sale properties is "why do short sales take so long?" A short sale happens when the loan amount on the home or property is higher than the sale price and the seller is asking the bank to take less than the amount owed. Therefore, a lot of things have to happen to make sure all parties are in agreement throughout the process. Here's a look at why they take so long:
- The seller's bank has to review the package. The seller is going to ask to see the seller's list of assets, credit score and purchase contract on the home. This "package" needs to be reviewed in order to approve the sell. A good listing agent will have this ready immediately and up front.
- Things tend to get lost in the process. A short sale package can have hundreds of pages and many of them need signatures from buyers, sellers and agents. If one page is missing or left blank, the whole package doesn't get processed. Additionally, once an agent faxes over a package sometimes the bank takes a month to even notify them that something's missing. A good listing agent will keep on the bank especially if they fax something to make sure everything is running smoothly.
- Documents can become outdated quickly. Weeks can go by by the time documents get processed and actually get to the negotiator who reviews and negotiates the sale. Every time you get a new bank or credit card statement, send it in to prevent any hiccups and make sure all needed material is current.
- The lender wants more information. Be ready to respond to anything such as lenders wanting proof of buyer's funds, or further verification of the seller's hardship. Anticipate anything they may need because any delays can take weeks.
- Complications from two loans. Sometimes two banks are involved with a short sale because the seller had two loans on the home. Imagine the communication problems that can arise between the two entities. This could set you back months.
- The deal could go bust at the last minute. Once the
bank has the package and the negotiator on the phone, you 're almost done. BUT, WAIT! Anything could happen! What if the negotiator counters the offer or asks the seller to kick in some money or asks for the commission to be lowered. ANY of these things could kill the deal. This is also one of the reason's it's not always smart to accept a low offer and assume the bank will approve it.
- Foreclosure happens. It can happen that the foreosure department at the same bank does not communicate well with the short sale department. If that's the case, even though there may be a good deal on the table, the seller may be six months behind on the mortgage making the foreclosure process begin. If that happens the buyer no longer has a deal on the table with the seller because the bank now owns home, not them.
Make sure real estate agents involved are experienced with short sales. This is your best bet to expedite the process. Give me a call if you plan on buying a short sale in San Diego.