The most frequent search term used to locate my short sale website is “Short Sale Timeline“. According to my website’s analytics people from all over the country are searching for information pertaining to the length of time a short sale takes to complete. While I provide a general time breakdown of short sales in my article located at http://sdshortsaleattorney.com/short-sale-timeline-how-long-does-a-short-sale-take-to-complete/ I think it is necessary to provide some updated information regarding short sales. First, short sales do not happen overnight. They take time. Much more time than a standard equity sale. Short sales require an additional, time consuming, step I will call “Lender Approval”. Lender Approval is when the short sale is evaluated by the homeowner’s lender to ensure that the offer is acceptable to the lender’s investor. There are several stages within the Lender Approval process that are necessary before the lender will issue an approval.
One of the most important parts of the Lender Approval process is “Property Valuation”. Property Valuation is when the lender hires a 3rd party real estate broker or appraiser to provide them with an independent opinion of value. The lender could use an automated valuation module (“AVM”), order a Broker’s Price Opinion (“BPO”) or order an appraisal. BPOs are used the majority of the time. BPOs are completed by local real estate agents and are usually more accurate than AVMs and much more cost effective to obtain than appraisals. The goal of Property Evaluation is to ensure that the submitted short sale offer is at, or close to, Fair Market Value (“FMV”). The lender has an obligation to the investors of the note to obtain an offer as close to FMV as possible. Waiting for the lender to order a BPO and to receive the results back typically takes 1-3 weeks.
Document Collection is also part of the Lender Approval process. In order to approve the short sale, lenders typically require the homeowner to fill out short sale request forms and submit financial documents. The length of time the Documentation Collection process takes depends on how quickly the homeowner and the selected real estate agent take to return the required documentation. This period of time could take a few days or a few weeks.
The Negotiation process takes places after the lender has received the results of the Property Valuation as well as all of the necessary documentation needed to process the short sale. During Negotiation, the short sale negotiator will review the offer price to determine if it is within the an acceptable range of the FMV. If it is not, the lender will counter the offer price during this time. The lender will also review the HUD to determine what expenses are and are not acceptable. Lenders will typically only allow expenses which are absolutely necessary for the sale of the property and will rarely allow such things as a home warranty or Section 1 termite expenses to be paid out of the proceeds of the sale. Negotiation of the short sale is a back and forth process that can take anywhere from 1-3 weeks. Real estate agents that are experienced at negotiating short sales are better able to prepare an acceptable HUD that lenders are more willing to accept.
The Lender Approval process culminates with Investor Approval and Issuance of the Approval. Most of the time the lender is not the investor of the loan. The lender is merely servicing the loan for a 3rd party investor. The lender reviews the short sale package, obtains the Property Valuation, collects the necessary documents and then negotiates the terms. Once all of this is completed the short sale file is submitted to the investor for approval. Most of the time this is a formality. However, sometimes investors are more involved and will thoroughly review the file and reject the lender’s negotiated terms and counter with their own. Although this is rare it does occur. Once the investor agrees to the terms the lender will issue Short Sale Approval and the short sale will then move into Pending status. The time period for obtaining Lender Approval can take 1-3 weeks on average.
As I pointed out in my previous article referenced above the average short sale takes, from beginning to end, 4-6 months on average. There are factors that can affect that time frame. One factor is if the property has multiple lien holders. If the homeowner has a 2nd lien or even a 3rd the time frame could be extended because each of those lenders has to go through their own short sale process in order to issue an approval. Many 2nd and 3rd lien holders will not even begin reviewing the short sale file until an approval has been issued by the 1st lien holder. Sometimes real estate agents can run into problems when the 1st lien holder requires approval from the junior lien holders before reviewing for the short sale. These situations can be extremely difficult to overcome by the average short sale because it creates a textbook “Catch 22″ situation. Another factor that could delay the short sale process is if the homeowner has any judgment or HOA liens on the property that need to be negotiated. In order for a short sale to be completed title must be clear of all encumbrances. Dealing with judgment and HOA liens could take weeks, or months, to deal with.
I must also point out that if your loan is serviced by Nationstar the estimated timeline for short sale completion could be increased by as much as 1-3 months due to the fact that Nationstar requires nearly every one of their short sales to be run through the Auction.com process prior to acceptance. The Auction.com process is used by Nationstar on the pretense of verifying the FMV of the property. However, it is a laborious process that is difficult to navigate through. So if you have Nationstar, you should plan on an additional month or 2 for short sale approval.
I will stick with my original time frame of 4-6 months for a short sale to be completed from beginning to end. Is it possible that a short sale could take less time? Of course. However, based upon my extensive experience negotiating short sales I stand by my 4-6 month timeline. A piece of advice. If you want to short sell your home find an experienced real estate professional to help you, preferably a real estate agent that is also an attorney. I might be a little biased but I am fully aware of what obstacles arise during a short sale and what my abilities are to overcome these obstacles. I know that many of the short sales that I have completed were only completed because I had to put on my metaphorical “Attorney Hat” to resolve the outstanding issues.
Once a short sale has been approved and a formal short sale approval has been issued the sale is just like any other sale. Escrow opens and the typical time periods apply.
If you are seeking to short sell your house and you are located anywhere in Southern California please call my office at 760-692-5950 or email me at Michael@MichaelGaddis.com If you live in San Diego, Riverside, Orange, Los Angeles, Santa Barbara, Ventura or San Bernardino Counties I can help you. When short selling your house do yourself a favor and get the best.