I'm reblogging Karen Crowley's post on what happens after a short sale offer has been accepted. In fact, I think I'll link to it and send it to a short sale listing agent who doesn't believe her client should sign the offer before the lender does!
Buying a short sale is different than a regular sale. Once your short sale offer is accepted, what happens next?
Here’s the series of events that will occur:
1) The seller must accept and sign your offer first. Next it goes to the bank (lien holder of their mortgage). That bank must approve your offer as well as the seller’s hardship situation and agree to the short sale. If there is more than one loan, the same process occurs with each additional lien holder.
2)To show your good faith and willingness to stay in contract while the bank goes through their short sale process, you will have signed a short sale addendum as part of the contract and most probably, agreed to a deposit amount for escrow. Depending upon how your contract has been written, you will need to write a check or deposit money via a wire transfer to the escrow company. (Referred to as deposit, or earnest money.
3) Now it’s time for patience. The bank will review the seller’s entire short sale package, including their financials, hardship letter and comps provided by the listing agent. A negotiator will be assigned to the file, and a BPO (broker’s price opinion will be ordered).
4) You are in a holding pattern until such time as the bank communicates that they have accepted your offer, but the listing agent should be communicating and progress made in the process. You may however, hear that they are willing to work with the short-selling homeowner, but the bank may counter your offer. In either situation, when both parties have agreed, the contract is fully ratified.
5) Once that happens, regular time periods come into play. The first step includes a set of disclosures about the property, provided by the seller for your review. You’ll receive a series of seller completed forms, as well as things like a preliminary title report, a natural hazards report, and for home sales in Livermore, CA – a building report showing any permits obtained.
6)Next, inspections will be scheduled. These usually consist of (at the very least), a pest inspection and a home inspection. Depending upon the home’s age, condition and features, additional inspections such as pool or spa, chimney, septic tank or roof may be warranted. Buyers will be paying for all inspections.
7) Now it’s decision time. Are you satisfied with the condition of the property following inspections? In a short sale, the seller won’t be allowed by the bank to pay for any repairs. And only in rare circumstances will the bank agree to do so.
8)If you’re getting a loan, your lender will order an appraisal.
9) Provided the appraisal comes in at value, your lender will advise you of loan approval and you will need to make arrangements for funds to be transferred.
10) Loan docs are drawn and sent to title, where you will sign notarized documents. Your down-payment money is now due, and your loan amount will be wire-transferred to the escrow company handling your transaction. This typically occurs 3-5 days before escrow is scheduled to close.
11) When your down-payment money and loan money are received, the loan is considered ‘funded’, and you’ll get a call confirming such from your lender or Realtor.
12) When the county recorder’s office records the sale, you are considered to be ‘on record’. Your Realtor will call you with the good news.
13)Once that call happens, you’ll receive the keys to your new home!
Each of the above things happen according to a timeline, generally spelled out in your purchase contract. Most escrows are 30-45 days, and on a standard California contract, you are allowed 17 for loan approval. With a short sale, those time-frames are often much longer. But the extra time occurs up front, while you are waiting for bank approval. Once that occurs, the process and time-tables run much like any other transaction.