How Long to Wait For a Short Sale Approval
Remember riding in the car as a kid and nagging your parents, "Are we there yet? Are we there yet?" You'll probably feel even more impatient waiting for short sale approval. In all likelihood, it will take much longer than you expect. Most buyers have a really hard time waiting out the approval process.
So how long is too long? Every short sale is different. It depends as much on the lender as it does on the listing agent. Some listing agents outsource their short sale negotiations to a third party and this can often delay a response even more, but there are a few things you can do to try to hasten the process just a little.
Before You Write the Offer
Ask your agent to do a little groundwork before you decide to buy a short sale home. Have them look into comparable sales. Many banks will discount the price a little from market value, but an offer should be reasonable and close to comparable sales if it's going to be accepted. You might also ask your agent to check out the short sale listing agent's track record as well. Your chances of offer acceptance might be slim if the agent has very few short sale listings and has little experience actually closing a short sale.
Find out how many short sale offers have been submitted to the seller. The listing agent might refuse to disclose the offer prices but she should disclose how many offers have been received. You might have to offer more than list price if multiple short sale offers have been received. Find out if the seller's short sale package is complete. Bank negotiators will not process a file if it's missing required paperwork. That file will go to the bottom of the pile.
How many loans are secured by the property? The file will probably take longer to close if more than one lender is involved. Some junior lenders have begun demanding unsecured promissory notes from the seller or more money than usual from the first lender. Some lenders will also only consider the first offer. If you're not the first, your offer might fall by the wayside.
Normal Waiting Period
What is "normal" for the waiting period depends on the bank. Some banks get approvals in fewer than 30 days, while other banks' short sales can sometimes turn around in 24 hours. On the opposite side of the spectrum are other lenders so swamped with short sale submissions, its employees simply can't respond in a timely manner.
The process is generally as follows after submission of the offer and a complete short sale package from the seller:
|Bank acknowledges receipt||10 to 30 days|
|Bank orders a BPO or appraisal||Two weeks to two months|
|The file is reviewed||Two to 10 business days|
|A negotiator is assigned||Two to 10 business days|
|Level II negotiator may be assigned||10 business days|
|File is approved or rejected||30 to 120 days|
Some short sales require additional levels of approval. If the investor is a government entity, that alone can add a couple of weeks to the short sale approval process. FHA short sales through HUD typically involve long delays. If the loan has mortgage insurance that wasn't added by the borrower, this can also result in an additional delay.
If you're running past 120 days, it's possible that the listing agent or a third-party negotiator is not on the ball and is lax about calling the bank. Calling the bank often means waiting on hold for anywhere from 10 minutes to an hour or longer—not something anyone would look forward to.
A really lengthy short sale period can also mean that the bank has internal problems, not enough staff, or that it's lost the file a few times, prompting the listing agent to resend the package over and over again. An extended delay can also mean that the appraisal is substantially higher than your offer and the listing agent is building a case for a new appraiser.
Patience Is Key
Unfortunately, you can't always avoid problems on a short sale. One of the hardest things for buyers to understand is that threatening cancellation of the offer means absolutely nothing to the bank. It doesn't care about the condition of the property, its location, the repairs you want to make, or any urgent matter affecting you. Your best bet is to stick it out and wait if you truly want the home.
If you see a home languishing on the market month after month as a short sale, it's usually not the lender holding up the sale. The buyer might have canceled so the entire process started over.