Why Do Short Sales Take So Long?

Why Does Buying a Short Sale Take Longer Than a Regular Home?

Why do short sales take longer than regular real estate transactions? This is a common question among home buyers, and it’s the subject of today’s article.

The process of buying a short sale can actually move quickly, if all parties are well versed in the process and procedures. Other times, it can take longer than a regular real estate transaction. Much longer, in some cases. To understand why, you must first understand what a short sale is and how it works.

Definition: A short sale is a process where a mortgage lender allows a homeowner to sell a home for less than they owe on the loan. It is often used to help both the borrower and the lender avoid a foreclosure process, when the borrower has fallen behind on payments. The goal is to sell the home as quickly as possible, which is why short sales are often priced below market value.

As a home buyer, you might be able to get a good deal when buying a short sale. That’s because they are often competitively priced. But it’s not always a smooth process. The bottom line is that anyone thinking of buying a short sale needs to (A) understand the process and (B) have a lot of patience.

Why Short Sales (Sometimes) Take Longer

Let’s get back to the question at hand. Why does buying a short sale take longer in some cases? The shortest answer is that there’s a complicated approval process.

When a homeowner sells a home in the traditional manner (for more than they owe on their mortgage), the lender knows it will be paid in full for the outstanding balance. So their approval is not needed — as long as they get their money, they’re happy.

But in the short sale process, the home is typically sold for less than what the borrower owes. So the lender will need to approve the sale. And this is where the process can slow to a crawl.

In a typical short sale scenario, the buyer presents the offer to the bank instead of the homeowner. It might take anywhere from two weeks to two months to hear back from the bank, depending on their backlog, staffing and other factors. They might accept your offer, or they might make a counteroffer. So the process varies quite a bit.

Buyers frequently complain of being “left in the dark” during this time, without hearing anything until the acceptance or counteroffer comes back. But if it’s a strong offer with all required paperwork, the bank will likely accept at some point. The question is when.

Is buying a short sale home right for you? That depends on how long you’re willing to wait. You could potentially save a lot of money through this process, because these properties are sold for about 10% less than market value (on average). But you might have to wait longer than you would in a regular real estate transaction.

These days, lenders are doing a better job of handling short sale offers, and turning them around faster. After all, they’ve had plenty of practice since the housing crisis. But you should still prepare for the worst-case scenario, which could be a sluggish sales process. Hope for the best but plan for the worst, as the expression goes.

Conclusion and Going Forward

 Buying a short sale can take longer than a standard real estate transaction, because the bank is part of the approval process. In most cases, you would make your offer directly to the bank, and you might not hear anything back for a few weeks depending on their workload.

But you could also save a lot of money by purchasing a short sale, and those savings often make up for the wait.

So, if you have the patience and flexibility for what might be a prolonged real estate transaction, and you’d like the opportunity to save money on a new home, then this might be the right option for you.


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