I’m often asked by clients and by other Realtors “How long does a short sale take?” I would like to give a concise answer, but alas, there isn’t a reliable one. The concise answer is too broad; “3 weeks to 3 years, depending on variables.”
(1) Who’s backing the loan?
FHA, VA, FNMA, Freddie Mac? They all have their different timelines and flaming hoops to jump through. Those flaming hoops eat up calendar time.
(2) Does the lender we’re negotiating with own the loan?
Does the lender own the loan or are they servicing it for someone else, like a pension fund or a foreign bank? If they’re servicing the loan, the servicer can run you through the ringer for months. Only when it passes their test do they forward the package to the investor, i.e. the actual owner of the loan. The investor has the power and authority to reject the short sale or counter offer with unfulfillable demands.
(3) Is there one loan or two?
This is a major time consumer, both on the calendar time and demand of the Realtor’s workload negotiating the short sale. The first mortgage company controls how much the second mortgage gets, the second mortgage often makes high demands that motivate the first to wipe them out in a foreclosure.
(4) Is there mortgage insurance on the loan?
Sometimes called MI or PMI, stands for mortgage insurance. The lender may have insurance that reimburses them for losses in a short sale or foreclosure. Since the MI company is bearing the loss, they often step in and override the lender’s negotiations. The MI can counteroffer with unfulfillable demands causing the wheel to come off the short sale wagon.
(5) Is the borrower eligible for HAFA?
HAFA, or Home Affordable Foreclosure Alternatives, is a program that many lenders in cooperation with the government put in place to provide incentives to borrowers to do a short sale rather than let the house slide all the way to the foreclosure sale. But, you guessed it, it adds complexity, paperwork and calendar time.
(6) Are there other junior liens that attached to the house?
Are there home owner association liens, city liens, sewer line liens, consumer debt judgments, business debt liens, local, state or federal tax liens, child support liens and the list goes on. All these liens need to be negotiated in the short sale process, adding more calendar time and workload time.
(7) Is the borrower in bankruptcy?
If the borrower is in bankruptcy, yup, it adds much calendar time to the short sale process. The bankruptcy court and the bankruptcy trustee have to approve the sale of the house under the terms and conditions of the short sale agreement obtained from the lender. Could easily add 3 to 5 weeks to the calendar time.
Other contributing factors:
(8) Are the sellers in divorce or post-divorce? Are there lawyers and mediators that have to fight over everything?
(9) Are there title problems regarding ownership or unreleased liens that should have been released?
(10) Have the sellers gone AWOL? Have overwhelming life events put the short sale effort on back burner?
(11) Did the lender suddenly sell the loan, or transfer negotiation duties to a collection company?
So how long does it take to get short sale approval? It depends on all of the above!
The most important thing to do, is put a knowledgeable, dedicated, experienced short sale Realtor on your side. In the Louisville, KY area, call Dave Halpern, Realtor, from Louisville Short Sale Expert Realtors (502) 664-7827
Readers are encouraged to add comments with other delays they have encountered.