More On Short Sales

Short Sales: What Is Taking So Long?

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It is ironic that we use the term “Short Sales” to describe a process that is anything but.  Short Sales take time, quite a bit of time.  If you consider 45 days an average time between a “normal” contract acceptance and closing, then add a minimum of one month, but plan on three or more months for approval. Add a month for each Lienholder over one, and be aware that some Short Sales have taken over one year for acceptance.

The reality that the Lenders have no deadline for a response and there is no guarantee you will even get one!  The property may foreclose while you are waiting for a response.

Phones went unanswered, and when they are answered you are placed on terminal hold, then transferred and the call drops. It was complete chaos. Documents were constantly getting lost and it was impossible to get answers.   

Lenders are much better today. They have either set up departments to specialize on short sales or they have outsourced the process to an Asset Management company. They can tell you in advance what documents they will require and the process a Short Sale offer goes through for approval.  

Short Sales still take months, but sometimes the Lender is not all to blame.  If the Lender is waiting for a document, the offer is in dead time; it will not even be placed in line until every item required has been turned in.

You can help expedite the short sale process by assembling all of the items required in advance. Write the Hardship Letter, prepare an Income & Expense Statement and make copies of all relevant financial documents (see The Short Sale Package).

Letters authorizing the Realtor to speak to the Lenders on behalf of the Owners should also be prepared well in advance.  Check with the Lender to see if they require you to use their form, or what information they require in a letter. Some Lenders require the last four digits of your Social Security Number for identification purposes when you call. The letter must be signed by all Borrowers.

By being completely prepared, the Short Sale Purchase Offer can be submitted to the Lender the same day. When the Lender receives the Short Sale package it is logged in and usually scanned. The package then waits for a preliminary review.

It may take weeks or even months before the file is pre-reviewed, when it is checked for completeness. If there are any documents missing, the Agent is usually notified to obtain them. 

This is why it is so important to submit a complete file. A missing document can delay the approval process by weeks.

Once the file is approved for completeness, it is assigned to a Negotiator.  This is usually the most time consuming step, where the file can wait weeks or months for the Negotiator to look at it.

The Negotiator may have questions about the Hardship Case and require even more documentation or explanation. They will often consult with senior management on purchase offers and order an appraisal or BPO (Broker Price Opinion). 

The BPO or Appraisal can add two more weeks to the process, and final approval of an Offer or Counter Offer usually requires senior management approval.

During this entire period no timelines are set or offered by the Lenders. They will not commit to deadlines but the Negotiators will sometimes make personal commitments, such as they will “look at the file next week”.

Why do Short Sales Take So Long? I believe they are short staffed, particularly at the approval levels, Negotiators & Senior Management.  These are relatively new positions for many of them and they lack experience and training.

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