Short Sale Timeline: How Long Does A Short Sale Take To Complete
Realtor/Broker and Short Sale Attorney Michael Gaddis discusses short sales on San Diego Living on CW6
Short Sale Timeline
Recently, I have had numerous questions about the life of a short sale, or, more specifically, requests for a short sale timeline. The underlying question is “How long does a short sale take?” The answer is complicated but, on average, the process usually takes 4-5 months.
A key element to the short sale timeline, and one that can affect the time periods mentioned in this article, is the proper selection of a real estate professional. Homeowners need to realize that not all real estate professionals are the same. A homeowner’s friend or acquaintance might have a real estate license but that does not mean that they are qualified to properly handle a short sale. For more information on how to select a real estate professional for a short sale please click the following link: http://sdshortsaleattorney.com/how-do-i-find-a-realtor-for-a-short-sale/.
The short sale timeline has 4 stages. The first stage is Marketing Stage. During this stage a homeowner will secure the services of real estate professional to market their property and obtain an offer from a qualified buyer. The length of time needed for the Marketing Stage depends on the market. There is no doubt that a homeowner will receive offers from investors attempting to get the homeowner to accept a low ball offer significantly below the fair market value of the property. These offers should be avoided unless absolutely necessary as the lender is surely going to question whether the low ball offer is representative of the fair market value of the property. A prudent real estate agent will hold off advising his client to accept such an offer and, instead, continue marketing the property in an effort to obtain a closer to market value offer. However, that could take a little bit of time because finding qualified buyers in a depressed market can be difficult. Plus, many of the buyers in today’s market are FHA and VA buyers. FHA and VA Buyers can present a challenge to homes that are not in acceptable condition. When a FHA or VA buyer attempts to buy a home an appraisal has to be done and the appraiser needs to make sure that the house meets the FHA and VA criteria. If not, then repairs must be done in order for the lender to grant the loan. Most of the time Sellers attempting a short sale either do not have the funds available to repair their property so that the property meets FHA and VA standards or the homeowner does not have the desire to ”throw” any more money into something when they are getting nothing out of it. VA loans also have an issue related to NON-ALLOWABLE VA expenses that the buyer is prohibited from paying. This prohibition against fees that are allowable to FHA and conventional loans means that the net recovery to the lender with a VA buyer will be less than the same buyer obtaining a FHA loan. I am not advocating that sellers steer away from VA loans but a real estate agent needs to be aware of this nuance when helping a homeowner decide which offer to accept. With that being said, I have been successful numerous times with short sales and VA buyers. All of this is relevant because it demonstrates that the marketing phase is complex and could take some time. I would say that the normal marketing time for a short sale from signing of the listing agreement until an offer is accepted by the homeowner to be around 30-60 days. Of course a homeowner might receive an acceptable offer 2 days after listing the property but, in general, 30-60 days is a good estimate. For the sake of overall time expectations I am going to use 30 days as a representation of the time period for the Marketing Stage.
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The second phase of the Short Sale timeline is the Submission Stage. The length of time needed for the Submission Stage depends on the identity of your lender. Some lenders have more fluid short sale departments and processes than others. For example, Chase and Wachovia are two of the more efficient lenders and, typically, they will review and process short sale requests much faster than other lenders. During the Submission Stage the lender will require the real estate agent to submit a short sale request, financial worksheet, hardship letter, supporting financial documentation, listing agreement, borrower’s authorization forms, the accepted offer, an estimated HUD1, a pre-approval letter for the buyer, proof of funds, etc. The Submission Stage is very document heavy and will require that a real estate agent be diligent in responding to requests from the lender. The lender may frequently ask for additional information or revisions to the HUD1. How a real estate agent handles the Submission Stage is critical to the length of time that the short sale application remains in the Submission Stage as well as to the overall success of the short sale. The Submission Stage can take anywhere from 14-60 days. However, I would say the average time is around 30 days.
Once the lender has received all of the documentation needed to satisfy the requirements of the Submission Stage, the Negotiation Stage begins. During the Negotiation Stage the lender will order internal pieces of information needed for the lender to be able to review the offer accepted by the seller. The lender will order a 3rd party valuation of the property either in the form of a Broker Price Opinion (BPO) or the lender will order an appraisal. The goal of the lender is to obtain a 3rd party opinion as to the fair market value of the property. Once the valuation is complete the lender can then review the offer to see if it is has a chance of being accepted by the investor on the loan. If the lender thinks that the offer is too low or if the lender is unwilling to pay for charges listed on the HUD1, the lender will issue a counter offer to the real estate agent. The real estate agent then contacts the buyer’s agent and the negotiations begin. The seller has very little to do with the final outcome as the real issue is obtaining an offer from the Buyer that the lender will accept. Once a price and HUD1 have been agreed upon the lender will send the file to the investor to obtain final approval. Once final approval is obtained the lender will issue an approval letter (see my website for examples of what a short sale acceptance letter looks like) and the short sale will advance to the next stage. The Negotiation Stage can take anywhere from 2 weeks to 2 months. However, I would say the average time is around 30 days.
The final stage of the short sale timeline is the Closing Stage. The Closing Stage is the normal escrow period that most homeowners are familiar with. The Closing Stage is typically 30-45 days and involves inspections, appraisals, disclosures and escrow paperwork. The average time for the Closing Stage is 30 days.
From beginning to end the average short sale timeline will take between 4-5 months from signing the listing agreement to close of escrow. Of course there are always exceptions and the process could be shorter or longer. However, this time frame represents a typical short sale timeline.
This article was written by Michael Gaddis, J.D. a licensed California attorney and real estate broker experienced in short sales. Michael Gaddis assists homeowners throughout the State of California with their short sale needs but concentrates on San Diego, Orange and Riverside counties. If you have questions for Michael Gaddis please feel free to contact him at 888-242-2272 or by email at firstname.lastname@example.org. To view actual short sale approvals obtained by Michael Gaddis please click the following link: http://wp.me/P25O37-3k
For more information regarding short sales please read the following articles:
Selecting a real estate agent to help short sell your house: http://wp.me/p25O37-aV
How to short sell your house? http://wp.me/p25O37-hs
Do I need an attorney to help short sell my house? http://wp.me/p25O37-7v
Information on the Mortgage Debt Relief Act: http://wp.me/p25O37-p7