Why Do Short Sales Take So Long?

Services for Real Estate Pros

Why Do Short Sales Take So Long To Complete?

For the homeowner anxious to complete a short sale and move on with their lives, the long, drawn out short sale process can feel like an eternity. Regular listings close approximately 30 days after listing on average – faster if it’s a hot market. Real Estate short sales on the other hand, take between 3 months to a year on average from offer to closing. Why do short sales take so long to complete when compared to regular home listings?

Short Sale Process

To better understand why the short sale process takes so long, it’s important to have a bird’s eye view of the overall short sale process. The short sale process starts with the hiring of the listing agent – the Realtor who will handle your short sale. This is perhaps the most crucial component of a successful short sale. While there are many otherwise good Realtors who can take on your listing, short sales are a niche, complicated area of Real Estate that requires specialization. You’ll want to find a short sale Realtor with a significant amount of experience in short sale transactions and working with your lender who can ensure that every step of the short sale process is completed expeditiously.

Your Realtor will then put your home on the market, similar to the way they would for any other home sale. Buyers will submit their offers, and if a suitable offer is submitted, your short sale Realtor will submit the offer to your lender, along with the listing agreement, the buyer’s financing preapproval letter (if required), earnest money deposit, and your short sale package. At this stage, the short sale approval process begins, and the waiting game begins for you as the homeowner. However, the ball is not entirely out of your court if you have an experienced short sale specialist working for you.

As your bank processes your short sale package and the buyer’s offer – which may take several weeks or even months – your Realtor will be negotiating with your lender, and pushing the short sale process forward. If your lender is satisfied with the contents of your short sale package, the buyer’s offer, and the terms your short sale specialist has negotiated, then you will receive approval to proceed with the short sale. Once the bank has granted short sale approval, the rest of the transaction closes like a regular listing, provided the buyer’s financing is still in order. With the lengthy short sale approval process, sometimes a buyer’s financial situation can change drastically.

Short Sale Time Frame Delays

So, where during this process does a short sale get held up, and why is the short sale time frame so much longer than that of a regular listing? The delay doesn’t occur during the listing process, as short sale properties usually receive offers at the same rate as any other similar property. It’s not during the closing, as this generally proceeds the same way as a regular closing. So what’s the hold up? Short sale delays are a result of slow processing times during the short sale approval process. There are several factors that contribute to slow short sale approval and processing.

Delayed Submission of Short Sale Package

A short sale requires a significant amount of paperwork and documentation, much more than for a regular house sale. Once the short sale Realtor has received a suitable offer, the Realtor and homeowner must prepare a short sale package and submit it to the bank, along with the executed purchase offer, the buyer’s financing pre-approval, the listing agreement, as well as the earnest money deposit check in order to formally commence the short sale approval process. Often, an inexperienced or slow Realtor who does not know how to do a short sale can delay the submission of the required documentation. Because the bank cannot start the short sale approval process without the required documentation, this can often result in unnecessary delays.

Banks Are Overwhelmed With Short Sale Applications

Some banks have faster processing times than others. One of the key delaying factors in a short sale is the bank’s own internal processing time for short sale applications. Many banks and lenders are simply overwhelmed with the volume of short sale applications they receive and need to process. There is a bureaucratic system in place to handle short sales, but it is often overloaded with a high volume of short sales that require processing

Delegated Authority Between Investors and Loan Servicers

Often, the lender you deal with is simply the servicer of your loan, meaning they are paid to process your loan, but they are not the actually equitable owners of your loan. Many home mortgages are actually owned by 3rd party mortgage investment funds, and not the lender or bank with which you deal on a regular basis. This adds another layer of bureaucracy that can further delay your short sale approval.

While the loan servicer – your lender – is often given authority to approve short sales that fall within a certain price range, on occasion they may also need to seek approval from the loan investor before they themselves can approve your short sale application. Given that your lender will also need to await a decision from the loan investor – and you and your agent have no way to expedite the process between them – this can often add months onto the already lengthy short sale time frame.

Mortgage Insurance

Another potential delay involves your lender’s mortgage insurance policy. Your lender may have an insurance policy in place to protect them against default. In such cases, the mortgage insurance company is another 3rdparty that needs to approve the short sale, before your lender can approve the transaction.

Speeding Up Short Sale Approval

While there is little you can do to expedite delays caused by the bank’s internal bureaucracy or 3rd party approvals, you can submit your completed short sale package promptly with the assistance of a good short sale Realtor, who can ensure that all the necessary documentation is properly included in your short sale package. You can also hire a short sale specialist who will handle all back and forth with the bank. There are many internal issues that can slow a short sale approval down, and an experienced short sale Realtor who has worked with your lender in the past can work with your lender to expedite the process as much as possible. While some patience on your part will still be necessary, hiring a short sale Realtor with a track record of successfully completed short sales will greatly increase your chances of having your short sale approved and completed in a timely fashion.

Have any more questions about short sales? Contact a specialist today! 1-877-737-4903

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Gina Tufano 12/08/2011 05:47 AM
  2. Nina Rogoff 12/08/2011 06:01 AM
  3. MeLisa Minter, Realtor 12/08/2011 06:29 AM
  4. Charles Stallions 12/14/2011 03:03 PM
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Andrew Mooers | 207.532.6573
Northern Maine Real Estate-Aroostook County Broker

Banks processing centers laying off and slowing down, less workers on the paperwork puts the process in crawl mode part of it too.

Dec 08, 2011 05:37 AM #1
Paul S. Henderson, REALTOR®, CRS
RE/MAX Northwest. - Tacoma, WA
Tacoma Washington Agent/Broker & Market Authority!

I have to answer that question all to often. I like you explanation...

Dec 08, 2011 05:37 AM #2
Nina Rogoff
RE/MAX Executive Realty - Medfield, MA
Sells Real Estate!

Mike, this is an informative, and well-written post! I've suggested it and am going to re-blog it. Great information!

Dec 08, 2011 05:50 AM #3
Ron Marshall
Marshall Enterprises - Saint Michael, MN
Birdhouse Builder Extraordinaire

You have already been reblogged by someone who didn't leave a comment, so I will.  Very nicely written, concise and to the point.  You should get a feature on this one!

Dec 08, 2011 05:52 AM #4
Mike Linkenauger
Jacksonville, FL
Short Sale Specialist Network

I would love it if ALL of you would recommend this to be featured! LOL...  Glad to hear you guys like our articles, check out some of the other recent ones as well -

Short Sale VS Loan Modification

What You Should Ask When Choosing A Short Sale Realtor

Will I be Forgiven of the Deficiency In A Short Sale


Dec 08, 2011 05:56 AM #5
James Lyon
LyonSF - San Francisco, CA

Great job putting this together, well thought out and written, thanks.

Dec 08, 2011 06:00 AM #6
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Mike -- a very good description of the Short Sale process, and where things get hung up.  It is too bad the lenders can't see to hire more people (even temporarilty) to get the backlog whittled down more quickly (after all, it is not like there are no people looking for work).

Dec 08, 2011 07:11 AM #7
Maggie Arnold

This is a great article.  Thanks so much for sharing.

Dec 09, 2011 01:07 AM #8
Adam Loew

Mike well written article.  Very inormative. Additionally, there are just reasons banks don't want to take the write off in the time frame, we as agents want, or need them to.. They have to space out and time their write downs.. Loss Mitigators are given specific guideliens and often quarter end and year end time is an impetus to move on files, so if you are early in the quarter, they will "add time"   However there are are alternatives to this LONG process, by PURCHASING the NOTE and BECOMING the Bank/Lender and then approving the sale very quickly...  If you are interested in finding out how, please contact me, as we do this as a creative work around to this very long process.!! All Commissions still earned, sellers and buyers are happy as are you, the Agent!! email me or call me today to find out how!

Dec 09, 2011 01:54 AM #9
Elva Branson-Lee
Solid Source Realty GA - Atlanta, GA
CDPE - Atlanta Real Estate & Short Sale Agent

Good article and also some good comments. I'm glad Adam Loew mentioned the fact that we are not privy to the lenders' internal reasons for slowing the process....But we know they have their reasons. Everything they do is for the benfit of their own books and bottom line. We need to remember that, and save ourselves some stress.

Dec 09, 2011 03:22 AM #10
Lehel Szucs
All Seasons Real Estate, Inc. - Covina, CA
REALTOR of choice

Hello Mike ... good article ... thank you for sharing


Dec 13, 2011 10:17 AM #11
Joan Valverde
Synergy Realty Group Inc - Colorado Springs, CO
GRI,CDPE,CNE,MRP,SRES Colo Sprgs, Blk Forest, Monu

Mike,  Very good information here.  It sure would be nice for the banks to get systems in place to speed these up on their end.  Short sales will be with us for a while.  Thanks for all the info. 

Dec 14, 2011 05:29 PM #12
Mike Linkenauger
Jacksonville, FL
Short Sale Specialist Network

Here are a few more recent articles as well that you may find useful -

Steps to writing a short sale hardship letter

Income Tax After A Short Sale

What Are The Qualifications For A Short Sale

Feel free to suggest any of our articles to be featured!!



Dec 15, 2011 03:29 AM #13
Bill Ligon

We are the buyer in a short sale in San Diego, it is a "cash" sale 2/22/2012 so is the bank, WF pushing off giving final approval to show the short sale loss in the 3rd quarter bank report????  

May 06, 2012 09:27 AM #14
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