Why Do they Call it a Short Sale if it takes So LONG??? Well, I think that is a really good question!! But before we try to answer that question, it's important to answer another one...
What is a "Short Sale"? A "short sale" is a sale of a property where the sale price is not enough to pay off the homeowner's remaining mortgage balance and all the expenses that a Seller must pay when selling their home. In other words, even if they sell the house at "full price" or market value, they are still coming up "short" of what they need to pay.
Unfortunately, while the term "short sale" describes the seller's position in selling their home -- it DOESN'T describe how long completing the sale will take.
How long will it take? Well that's another great question. The best answer is probably "longer than usual". How much longer than usual depends on a number of factors and a number of people. A short sale can take anywhere from 60-120 days if everyone does what they are supposed to, and even months longer if there are delays.
Why does it take so much longer? Because the seller won't have enough money to close their sale with the money from the buyer's purchase money, they must get special approval from their lender to allow this sale to happen. They have to provide a bunch of documentation proving to the bank WHY the bank should allow them to sell their home without paying off their loan obligation in full.
In a traditional sale, only the buyer has to go through a qualification process. In a short sale, both the buyer AND the seller have to qualify, and there are different requirements for each.
Sources of delays on the Seller's side of the transaction are numerous and varied.
- The Seller's bank or loan servicer
- The Appraisal Process
- The Investor or Mortgage Insurer
- The Buyer
- The Seller
- The Agent
Yep, just about anyone involved in the short sale can cause a delay. Because of the complexity of the short sale transaction, and the number of people involved to make these sales happen, delays are an expected part of the process.
Why should I buy a short sale if I have to wait so long to actually be able to close? Because of the complexity of a short sale, and the possible extended time to get to closing, there are a number of buyers who just won't consider them. So the Seller's pool of available buyers is smaller than those on a traditional sale. Whenever the number of possible buyers is smaller, the property value is bound to be affected. These homes often sell for less than an equivalent home that is not being sold "short".
If you have the time, and can commit to the longer time between contract and sale, and can handle the uncertainty of knowing whether the bank will allow the sale to go through, there is a financial benefit.
It's important that Buyers considering a "short sale" understand the short sale process and are well informed about delays and things that can prevent a short sale from closing. Ask lots of questions. Get representation from an experienced real estate agent.
If you're a buyer in the Greater Hartford area of Connecticut, give me a call! I'd be glad to sit down with you and see if buying a short sale is a good choice for you!
And if you are a seller who cannot sell your home for what you owe, call me for a confidential consultation... There are still several options for most homewoners. If a loan modification is not the answer, I know how to put that short sale package together and get the job done.
Photo "DELAY" courtesy of Jordiet
Comments(6)