So you’re thinking about a making an Offer on a home in Folsom but dang, it’s a Short Sale. That’s so not happening. By now most everyone has heard way to many Short Sale nightmare stories. They take forever and they’re a drag. But do you know why? Actually a lot of Short Sales fail not because the Lender says no to the Offer, but because as time passes Buyers don’t see anything happening so they get frustrated and pull out of the transaction. I have heard so many Agents lament this because so often deal falls apart just days away from of getting an approval. Bummer for all.
Here is a brief explanation about the process of a Short Sale. It won’t make a Short Sale go any faster but it might help the patience quotient a bit.
So what is a Short Sale?
A Short Sale is when a home owner needs to sell their property but they owe more to the lender than they will net from the sale and they are unable to make up the difference with funds from other sources.
How do I Make an Offer?
A Purchase Offer on a Short Sale is negotiated with the Seller in the same manner as a normal sale. However, once the negotiations are complete and the Seller has accepted an offer the Purchase Contract must be sent to the Seller’s lender for approval. The Seller’s lender may accept the Contract as written or it may insist on changes or it may reject the contract outright. The lender is not obligated in any way to agree to the terms of the Purchase Contract as negotiated by the Buyer and Seller.
Additionally, if the Seller has more than one loan on the property, all lenders must agree to the terms of the Sale and this adds to the length of time it takes to get an approval.
What is the Process and How Long do Lenders Take to Make a Decision?
All lenders have “Loss Mitigation” Departments to handle Short Sales and Foreclosures. The Listing Agent compiles a Short Sale packet per the Lenders instructions. This packet includes the Purchase Contract and stack of information specified by the Lender regarding the Sellers financial situation and the special circumstances that are causing them to be unable pay their loan, often referred to as “hardship.” The completed packet is sent to the Lender and is assigned to a Loss Mitigation Officer or “Negotiator” who becomes the single point of contact with the Listing Agent. The Negotiator reviews the packet to be sure all pertinent documentation is included to be able to determine that a hardship exists. Once everything is in order they will ready it for presentation to a Review Committee for approval. Once the Review Committee has confirmed the a hardship exists for the Seller, it may approve the Purchase Contract as written or it may insist on changes or additional documentation before being satisfied with the terms. This process may require several presentations to the Review Committee and may take anywhere from a few weeks to several months. How quickly the process moves along depends in large part on the work load of each Negotiator and the overall volume of short sales being processed by the Lender.
During this process the Listing Agent is the sole point of contact with the Sellers lender. Buyers and Buyers Agents do not have direct contact with the Loss Mitigation Departments.
If a Buyer is willing to wait Lenders do approve them. So in a Short Sale, patience is indeed a virtue.