Many homes on the market right now are short sales. What that means is the seller is likely in default (they are behind on their mortgage payment) and are asking the bank(s) that hold the loans on the property to take less than what the loan balance is. The listing agent typically prices the home for less than what is owned to the bank (this is where the term "short sale" comes from). Many people laugh when I tell them it's a short sale as the process can take many months to close.
Once you write an offer on a short sale that is agreed to by the seller, it is submitted to the bank by the listing agent. The seller submits financial information and a hardship letter to the bank with the short sale package. This package goes to the short sale department and someone at the bank reviews the file and makes sure it's complete.
Once the bank determines the package is complete it is assigned to a negotiator. The negotiator will order a BPO (broker's price opinion). Then it goes for an approval. This process can take two months to 8 months. Depending on the bank. What can be frustrating is by the time your short sale is approved, the buyer can move on or lose interest. I have seen in one case where the values dropped almost 20% in the time it took to get the short sale approved and then the buyer had to start all over with a new offer to the bank. Sometimes in the lengthy process of short sale approvals, the bank fails to negotiate a short sale in time and the property forecloses to the bank. Don't despair. Short sales can be a good bargain. Foreclosures cost money and banks would rather negotiate a short sale than foreclose. It's important that the listing agent communicates the process to you through your agent. Don't be afraid to ask your agent for updates. Your patience will pay off. There are great deals out there with short sales but you have to be patient and play the waiting game.
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