The issue with short sales is that it can be a long process. While some can be approved in the 30 day range, many end up dragging out. Banks require lots of documents from the all parties, primarily the seller. Often, deadlines are set, and if you miss a deadline, a file has to be re-started.
Getting a short sale approval letter from the lender: 3-5 business days. Settlement: 30-45 days.
There are several reasons why banks reject short sales but the three most common reasons that disqualify a property for a short sale are comprised of an initial offer price that is very low, disqualification of the property seller for the short sale, or disqualification of the buyer for the short sale.
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.
The lender is presented with an offer, accepted by the seller, along with a completed short sale package and narrative explaining why the short sale is necessary and desirable. The lender approves the offer and escrow closes as usual. No proceeds go to the seller.
No rules exist for how long a short sale can last before being closed out. The lender of the shorted shares can ask that the investor return the shares at any time, with minimal notice, but this rarely happens so long as the short seller keeps paying the margin interest.
In most cases, these fees are the obligation of a property owner when they sell the property. In a short sale, these fees are paid by the lender.
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.
In most states, the bank can seek a personal judgment against the borrower after a short sale to recover the deficiency amount.
The short sale bank has every right to reject the offer, negotiate the offer, or demand a highest and best, ect. Seller acceptance is never a guarantee of short sale approval on any property.
To sell stocks short, you need to open a margin account
To qualify for a margin trading account, you need to apply, and you must have at least $2,000 in cash equity or eligible securities. When you use margin, you must maintain at least 30% of the total value of your position as equity at all times.
Your lender may order a home appraisal to determine whether the offer is sufficient, even if the offer is below the market value. Keep in mind, lenders often approve short sale offers below market value to avoid a costly and time-consuming foreclosure.
A short sale isn't as straightforward as a traditional real estate transaction. You might need to work with an experienced real estate agent to find properties, and potentially with an attorney who specializes in these types of deals.
Unfortunately, it is easy to lose more money than you invest when you are shorting a stock, or any other security, for that matter. In fact, there is no limit to the amount of money you can lose in a short sale (in theory).
Which of these lenders would be least likely to approve a short sale? junior leaners (Because they're in a secondary position when it comes to liens against the property, they realize that there may not be any money left to pay them after the lender in first position is paid.)
Time: It can take longer to close on a short sale than a typical home sale because several lienholders are If the property has additional liens, they'll need to be sorted out and approved by the bank or lender prior to any sale.
Banks almost always negotiate on the bids they receive – they rarely accept them on the first go-around. They'll review the bids and take the highest offers, negotiating with buyers to get the dollar amount they want for the home.
After the short sale is completed, your lender might call you or send letters stating that you still owe money. These letters could come from an attorney's office or a collection agency and will demand that you pay off the deficiency.
If your lender agrees to a short sale or to accept a deed in lieu of foreclosure, you might owe federal income tax on any forgiven deficiency. The IRS learns of the deficiency when the lender sends it a Form 1099-C, which reports the forgiven debt as income to you.
How to speed up a short sale. The best way to expedite a short sale approval, and therefore your escrow, is to be certain the seller's real estate agent is experienced with short sales. The seller's agent interfaces with the bank 24/7.
In case of short deliveries on the T+1 day in the normal segment, NSE Clearing conducts a buy –in auction on the T+1 day itself and the settlement for the same is completed on the T+2 day, whereas in case of Z/5 settlement type there is a direct close out.
The bottom line on short selling
It's a relatively sophisticated (and risky) trading maneuver that requires a margin account and a keen understanding of the stock market.