How Long Does It Take To Close A Short Sale?
This is the question on the mind of every buyer who considers purchasing a short sale. Since a short sale is a property selling for less than the amount owed to the bank, it requires a longer negotiation process than a regular sale before there is a closing. If the listing agent and any negotiators used are experienced and knowledgeable, the odds are higher that the short sale will close.
Who The Players Are In Closing a Short Sale
There are many more players in closing a short sale than a regular sale, and this adds to the length of time. In a regular sale, you typically have the buyer and seller, listing agent and buyer's agent. In a short sale, add an investor who actually owns the note, and a layer of employees who work for the bank servicing the loan. This can be two or more people. Sometimes it is necessary to go up the ladder at the bank or outside the bank for assistance to put pressure on the bank to cooperate, so it is even more complex. If there is a second loan or even a third sometimes, the process of investor/bank employees starts all over again with each loan.
Time Frame for Closing a Short Sale
The time frame for closing a short sale varies depending on the bank and investor. In our experience, we have closed short sales in under 60 days from contract to closing. This is not the norm. The norm would be more like 90-120 days and even 180 days. There are some short sales that take very long, up to a year or more, but these are the exception. I have read about a colleague who closed one in around 30 days, but this is very unusual in our experience.
In our area of Florida, the Short Sale Addendum states 60 days for an answer if left blank, but the reality is that an answer may take longer. If there is a second or third lien, these answers may be approved earlier than the first loan response but have to be renegotiated by the time the first lender gives its bottom line.
Think about a short sale process just like getting a loan process, only about 4 times longer. The file has to be sent to the bank - sometimes multiple times. The file sits on the desk of the person with hundreds just like it, waiting its turn. The person looks at the file to verify that the package is complete. It if is, it is routed to the next person up the line until finally it gets to the negotiator. Each time the file goes to another person, it waits in line with hundreds of files in front of it. There is a process to escalate a file if the person handling it is not working in a timely manner.
When the file is assigned to a negotiator, they will usually order a BPO (Broker's Price Opinion) to compare the market value of the property with the price in the contract. The next step is the formal Appraisal. All negotiating is centered around a preliminary HUD-1 that is submitted with the contract to purchase the property so the lender and any other lien holders can see what their bottom line will be if they accept this amount. Every time the dollar amount negotiated changes, a new HUD-1 must be issued and sent to everyone involved. Once a dollar amount is approved, a new HUD-1 is prepared with up to date figures. If the contract so states (and it should), the time frames begin for all contingencies, including building inspections and securing financing. Although the approval letter may have a 14-day or less time frame to close, the reality is 30 days from Short Sale Approval to closing a short sale. It is much faster for cash and sometimes a lender can speed up the process.
So count on a minimum of three months but be prepared to wait four to six months and even longer in some instances for closing your short sale. If this article has helped you, please let us know. If we can help you or refer you to any of the network of agents we know around the country who are experienced with short sales, just give us a call or email us.