Short sales are sales at a price that’s not high enough to pay off the mortgage. So – the money is short. Sadly, the time to complete a short sale is anything but short. USA Today had an article this morning on short-sale frustrations. We’ve represented both sellers and buyers in short sales and it’s generally a case of Wait – Wait – Wait. We’ve had buyers that didn’t get a lender response for 6 months. Many times buyers will get tired of waiting for months for an answer to their offer and will withdraw. Sometimes the lender will counteroffer and the buyer will decline. Back to the starting gate. USA Today cites a study that says just 23% of short sale offers actually close. If I had to make a guess from experience, I’d say perhaps only 5% of the offers actually close – perhaps 23% of the offers that get a response from the lender close.
The timing and complexity gets more complicated if there is more than one loan. If it’s a home equity loan, even with the same lender, it’s a totally separate department. Sometimes there are second or third mortgages. Sometimes FNMA needs to approve. Sometimes a guarantor needs to approve. Sometimes the mortgage is owned by multiple investors. And yes – by the time the lender responds, the market may have changed and the buyer may not longer be willing to pay the once-offered price.
It helps if the real estate agent and/or title company checks to be sure the original documentation (financial statements and hardship letter from the owners, brokers price opinion, etc) is complete, as the package will keep getting rejected if anything is missing, so the time line doesn’t even start.
We hear that the government has plans to streamline the short sale process.