When talking to individuals who are just getting started in short sales, I often hear the following question, "Why does it take so long to hear back from lenders about my offers?" To help answer this common question, I pulled together a short list of possible reasons causing the long holdups.
Naturally, this is not a conclusive list, so I would appreciate your comments and feedback on what you think are other possible reasons causing these long short sale delays.
POSSIBLE REASONS FOR DELAYS:
1. Because of the epidemic number of U.S. foreclosures, there are just too many cases for loss mitigators to review.
In a conversation I had with a mitigator several months ago, she told me that she had over 400 short sale files she had to review. Naturally, with this type of unprecedented case load before her and many other loan specialists, it makes it extremely difficult for mitigators to quickly review offers, order BPOs, and follow up in a timely fashion with individuals that submitted short sale offers.
2. There are not enough experienced loss mitigators to keep up with the growing case demands. There are a large number of unskilled mitigators still learning the ropes and ill-prepared to keep up with the excessive demands pushed on them by the growing number of homeowners defaulting on their mortgages.
3. Short sales can take longer when there are multiple lien holders involved. If the second lien holder wants more than the first is willing to give up, then this stalemate could add addditional weeks to the timeline before a decision on your offer is rendered.
4. If you haven't heard back from the mitigator since you submitted your offer months ago, it could be because your seller/homeowner is still making his mortgage payments. Typically, lenders won't consider a short sale unless the homeowner is delinquent by three months. So, naturally, if the seller is still making his mortgage payments on time, then the lender will be a lot less motivated to consider your short sale offer and may even just plain throw out your request.
5. Another key reason for the long wait time in hearing back from mitigators is usually because of the investor involved in the short sale. Yes, in case, you weren't aware of it, there is usually an investor lurking behind the scenes. He owns the seller's note and may have imposed strict short sale guidelines. In this situation, all offers would need to be approved by the investor(s) before the mitigator could relay/convey news back to you whether your offer is approved or not.
6. Another reason for the holdup is that there is frequently too many parties involved in the short sale process. In case you weren't aware, there are usually three parties involved in the short sale review process, which can unfortunately help to lengthen the time it takes to receive word back from the loss mitigator.
There is the Lender (or investor), the Servicer, and the MI Company. The lender loans the borrower/seller the money to purchase the property. The Servicer sends the seller his monthly loan statements and collects mortgage payments, and the MI Company provides insurance to protect the lender's interest in the property in the event the seller or borrower defaults on the loan.
Since PMI is always required when the borrower's LTV ratio exceeds 80%, this would naturally explain why the MI Company would be involved in short sales where the seller has little or no equity in the property. Also, this would help to explain why it can take mitigators considerably longer to get back to you on short sales falling within the parameters described.
Well, this sums up my list of reasons for the LONG WAIT TIMES in receiving news from mitigators on short sale offers. Again, if you have other reasons you'd like to add here, please be sure to leave me your comments.
AUTHOR CREDITS:
"Short Sales: Reason Why They Take So Long," from Tracy Miller's Blog: Short Sales & More! (Material Copyrighted 2008. Tracy Miller; All Rights Reserved.) Tracy's blog published at Active Rain Real Estate Network (www.activerain.com/blogs/tracyshortsales). It is permissible to reprint, repost, reblog this material.
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