Making an offer on a short-sale home? Extreme patience required!
Minneapolis, MN: So why do short sales take so long? I get asked this question all the time. There are many reasons, some obvious, some not so obvious. Simply said, the seller owes more on the home than the home is worth today, and they are about to ask the bank to accept an amount lower than what is owned. If I owed you $200,000, and randomly called you to say, “will you take $150,000 and call it good”, what you you say?? What would YOU do before you simply decide to accept less money?
SHORT SALE BASICS
Below, you’ll find some facts that people are usually surprised to hear about short sales and why short sales take so long:
- The distressed homeowner decides to seller the home
- The homeowner then begins working with a real estate agent, (not the lender), to determine how much money the home is worth today, and how much they will have available to pay the lender minus real estate commissions, closing costs, any additional liens, etc…
- The home is put on the market
- A buyer signs a purchase agreement contingent on the bank accepting a short payoff.
- The bank is unaware of anything at this stage.
- The homeowner and their real estate agent presents the short offer the bank along with the potential buyers offer.
- This Short Sale Package must provide an accurate and compelling story regarding the homeowner and the hardship that is preventing them from continuing to make their mortgage payment.
- The bank will start reviewing the information provided to determine the homeowner’s eligibility for a short sale, based on their hardship and the current market value of their home.
- The bank could have hundreds of files that they are working on, and are at various stages in the process, at any given time.
- The bank will request a variety of reports and documents to substantiate the homeowner’s income and assets, as well as the market value of the property. Often, these requests are made several times, at various stages, throughout the short sale process.
- There can be many lien holders that must agree to basically give up their interest in the property. This includes 2nd mortgages, securitized asset holders (Fannie Mae or Freddie Mac) and even private mortgage insurance companies. Getting all those people to agree is very tricky and time consuming
- Just because the homeowners is trying to sell the house for less than is owed, does NOT mean the bank will accept the short offer
All this takes time. Usually around 90 – 120 days. Sometimes shorter, sometimes longer.