How Long Does A Short Sale Take?

You might find yourself in the position of having to sell your home in a short sale. Or maybe you are looking for a new house and find an attractive property that is listed as a short sale. In either case, it is important to understand how short sales work, why they come about and how long a short sale takes. Read on to find out more about this subject.

What exactly is a short sale?

A short sale is a financial option for a homeowner when they are unable to keep up with their mortgage payments and fall behind. Also, the home has lost quite a bit of value and now is worth less than what the homeowner owes on the mortgage.

With a short sale, the homeowner is able to sell the property and, through an agreement with the bank that holds the mortgage, put an end to an untenable situation.

If you are a buyer considering a short sale, you may be able to actually purchase the property for a lower amount than what it’s really worth.

Are short sales and foreclosures the same thing?

There are vast differences between a foreclosure and a short sale, although they both offer a financial way out for homeowners that find themselves in financial distress. Mainly, while the short sale allows the homeowner to negotiate the terms of the sale with the financial institution that holds the mortgage and come to an agreement as to the sale of the property, the foreclosure implies that the homeowner has been forced to leave the property (many times against their will) and this is now in the hands of the bank that holds the mortgage.

Other major differences between them imply consequences for the homeowners when they want to get a future mortgage and damage to their credit scores.

Do they both sell equally fast?

Generally, foreclosures sell faster. Why? Because the bank owns the property and is interested in selling it as fast as possible in order to recover the money they are owed.

Why do short sales take longer?

Because they happen only after negotiations between the owner and the bank. To begin with, the bank will ask the homeowner for a long list of documents, among them:

●      W2s and 1099s for the last two years

●      Tax returns for the last two years

●      Two bank statements

●      Payroll stubs

●      Hardship letter explaining why they are defaulting on the mortgage

The bank also needs to know what type of loan the property owner has, whether it is a conventional loan, FHA, VA, Freddie Mac or Fannie Mae.

Once the bank has all the documentation, reviews it, assigns a negotiator and issues a short sale approval, the short sale may move forward. But this can take many months.

What if you are the buyer interested in a short sale?

You must be aware that the offer you make on the house will not be accepted by the seller but by the bank. A short sale may end up getting you a house for a great price, but you may have to wait some time for your offer to be approved. Patience and luck are important elements to ensure you end up with the house you want. Learn more about buying a short sale before putting n an offer.