Question for those who purchased short sales...

Our offer was accepted yesterday on a house going through a short sale. We are in the process of doing the inspection and contract negotiations. Unless there is a huge problem, I don't see this taking too long to get everything submitted to the bank. My question is, how long did it take from the contracts being submitted to the bank accepting the short sale price? I know each case is different but I was just wondering what other people's experiences have been.

Re: Question for those who purchased short sales...

Congratulations on your accepted offer!

Just wanted to let you know that when you say getting "everything" submitted to the bank, it's not just the contract and documents related to the purchase. There's also a lot of financial information and documentation that the SELLER needs to provide to the bank, or banks, involved to show that they qualify for a short sale and it makes sense for the bank to allow it. How cooperative the seller has been in the process, and how much of this work has been done already, has a big impact on how quickly you can expect to get a response from the bank. The experience and organization of the listing agent is also a factor.

So you probably want to find out from the listing agent (or have your agent inquire) where things stand in the process. Has the seller submitted all of the short sale package documentation already? Does the bank even know the home is on the market? Does the bank know what the house is listed for?

Some agents put a house on the market that will require a short sale, and list it at a very low price to attract offers. But unfortunately, the bank would never approve that price, and that becomes apparent down the road. Banks are becoming more and more vigilant about making sure they get fair market value, or as close to it as possible, for homes that are being sold as short sales. They want to minimize their shortfall.

Good luck with the inspection. Keep in mind that short sales are typically sold "as is" because the seller does not have the money to make any necessary repairs.

Re: Question for those who purchased short sales...

Ive heard mixed answers. I can tell you I we did the inspection, put the downpayment down and everything in August and we are STILL waiting for their bank to accept it. I am 2 seconds from walking away. Its terrible not having a timeline. My first on or about date was November 15th.

Re: Question for those who purchased short sales...

Re: Question for those who purchased short sales...

Just wanted to add that one thing you can do, as a short sale buyer, to avoid being tied up (and having your down payment tied up) for an extremely long time (I've heard of banks taking 9 or 10 months to respond) is to have your attorney put in a clause that puts a time limitation on how long you need to wait for the bank's response. So, you can say, if the bank doesn't respond within 120 days, you can walk away from the deal. But if you make the time period unreasonably short or you may as well not go through the trouble at all. But I think 4 months is a reasonable amount of time to wait.

I would make sure your attorney is well-versed in short sales, and also find out what his or her fee arrangment is. If the short sale is denied, and you never go to closing, how much (if anything) does the attorney charge you?

Also, try to find out who will be dealing with the bank. Once there's an offer on the table, the bank will assign a negotiator. Who will be handling the communications with the negotiator? Is it the listing agent? Sometimes real estate agents will outsource this role to a law firm or to another company that specializes in handling short sales.

And it's important to understand that "going to contract" in a short sale has very different ramifications than in a traditional sale. In a traditional sale, once the parties sign the contract, the property does not show as available online anymore, and the parties are just waiting for the buyer to obtain their mortgage so they can close. With a short sale, the contract is subject to third party approval, so it has much less significance. The bank can completely reject the contract, modify the terms, etc. And while the contract is "pending bank approval," it still shows as available online, and the listing agent is still legally obligated to present ALL offers to the bank.

I think a short sale can be a great opportunity for the right buyer, but if a buyer has a specific time frame in which they need to be in a house, I steer them away from short sales. And even if someone decides to pursue a short sale, it's important to understand how the process differs from a typical sale.

Hope this helps!

Re: Question for those who purchased short sales...

We bought a short sale. When we went into contract, everyone warned us that it could take a while. Ours moved very quickly. We signed contracts and closed 6 weeks later. If the seller has everything in order with the bank already it can happen quickly, but I guess it's different for everyone. Good Luck!!

Re: Question for those who purchased short sales...

Thank you for all of the responses. As far as we know, the seller has started the ball rolling already with the banks. I feel like I hear a lot about the horror stories with short sales and the long process. ReRe17-Thanks for the positive experience!

We have some time as we are getting married in July but we would like to at least close before the wedding. Fingers crossed!!

Re: Question for those who purchased short sales...

We bought 4 years ago; it took about 6-8 weeks to hear back from the bank!! I think we signed the contract end of February; and had an answer end of March early April. We closed end of April so once the bank accepted it went very fast!