Why Do Short Sales Take So Long to Close?

Why do Short Sales Take so Long to Close?

Short sales, it means when a home owner owes more than they can pay on their home.  They are "short" on their mortgage.  Often what happens is, say you owe $100,000 on your mortgage.  You get an offer that will net you $80,000, you are "short" $20,000.

If only it were that easy.  The homeowner must also factor in many penalties, some which accrue on a daily basis.  It just becomes overwhelming.

More overwhelming?  Waiting for the bank to approve an offer.  A short sale contract isn't like a "normal" contract (that being, a three business day attorney approval, inspection and mortgage contingencies - generally a six week start to finish process).  The short sale approval period may take months, even a year or more. 

So what takes so long?  Lenders have to "reverse underwrite" a short-sale.  This is when the bank crunches numbers to calculate whether the sale is worth their while, meaning, is the home being sold for close to market value?  If the home is being "undersold," (the contract is far lower than what is owed), the bank may opt to foreclose and put the home back on the market as a bank owned property.  It can take months for the bank to do the research and make this decision.  Oh, and the buyer is to sit back patiently and wait.  Many times, buyers walk because they just can't take not knowing whether or not the bank will deny the sale, thus leaving them to start their home search all over again.

It's uber important that the seller has all his/her ducks in a row prior to even getting an offer.  Once a contract is received, the bank is going to give a very short timeframe for the seller to produce a host of documents (income, profit and loss statements, tax returns, hardship letters).  With debts compounding and the stress of being upside down on the mortgage (in addition to the possibility of pre-foreclosure notifications), many sellers are not in the right mindset to be able to organize these documents on a moment's notice.   It's best t have all these things in place when the home is first put on the market.        

A real estate professional can help you through the process.  While unpleasant, having the right person in your corner can help you get to the other side of a difficult situation. 

Questions?  Call me at 518-577-6571 or e-mail me at sprezio@cbpp.com

Suzanne Prezio

Suzanne Prezio

Licensed Real Estate Salesperson, CBR
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