A short sale typically takes 3 to 6 months, but can range from a few months to over a year, with lender approval being the longest and most unpredictable part, often 30-90+ days after offer acceptance. Factors like lender responsiveness, the number of liens, market conditions, and complete documentation significantly impact the timeline, with multiple lenders or complex situations extending the process.
Part of what makes this process take so long is that the bank doesn't tell you how much it wants for the property. Instead, they look at the offer from the buyer and decide whether to accept or reject. Waiting to hear back from the bank is the first of the delays in the short sale process.
The short sale process has multiple steps, and it's common for a short sale to take 4-6 months to complete from the time the offer is accepted, and in rare cases, even longer.
Most short sales I close take 6 months to a year, this is with a short sale negotiator/atty involved. You should be aware that a lot of times the bank won't let the seller pay for some charges that they might typically pay so the buyer has to pick them up.
As stated above, the short sale process can get lengthy. There is a risk the homeowner can get into greater trouble with missing payments, and it can result in foreclosure. Foreclosure is a legal process that happens when the homeowner forfeits the property to the bank as a result of being unable to pay the mortgage.
In a short sale, the lender typically pays most of the seller's closing costs, including agent commissions, title fees, and taxes, because they are accepting a loss to avoid foreclosure. The buyer is responsible for their own closing costs, but negotiations are key, as the lender must approve all expenses, and sometimes the buyer may negotiate for the lender to cover some costs to get the deal done.
The Rule prohibits the lender and consumer from closing or settling on the mortgage loan transaction until 7 business days after the delivery or mailing of the TILA disclosures, including the Good Faith Estimate and disclosure of the final Annual Percentage Rate (APR), even when all parties are prepared and desire to ...
Banks typically prefer to recover as much of their loan balance as possible. If the purchase offer on the property is significantly below the outstanding mortgage balance and the bank believes they can recover more through foreclosure, they might deny the short sale.
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When there is only one mortgage, lender approval typically takes about two months. If there is more than one mortgage with different lenders, it can take four months or longer.
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A two-week closing with financing is challenging but possible with exceptional preparation. You'd benefit from complete pre-approval with full underwriting, a motivated lender, immediate appraisal scheduling, and no inspection or title issues. Cash purchases make two-week closings much more realistic.
In most short sale transactions, the lender (mortgage servicer) pays the real estate commissions, not the homeowner. The commission is typically negotiated and approved as part of the short sale approval process.
The short seller must later buy the same amount of the asset to return it to the lender. If the market price of the asset has fallen in the meantime, the short seller will have made a profit equal to the difference in price. Conversely, if the price has risen then the short seller will bear a loss.
If you're purchasing a short sale, your goal should be to make an offer that reflects the realistic value of the property while also considering any necessary repairs. A fair offer that aligns with market value—supported by a strong preapproval letter—goes a long way.
Short sales actually bring the bank more money than they would receive in the foreclosure process. This myth that the bank would rather foreclose remains prevalent because of the extreme difficulty people face during the loan modification process.