At the end of the short sale, the bank ideally agrees to let you pay $115,000 for that loan and eat the difference. 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.
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.
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.
AFTER the buyer is secured, the average short sale approval time in my experience is about 6-12 weeks. After approval, the sale will still need to close (usually another 30 days).
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.
Short sale package: The borrower has to prove financial hardship by submitting a financial package to their lender. The package includes financial statements, a letter describing the seller's hardship(s), and financial records, including tax returns, W-2s, payroll stubs, and bank statements.
Sellers Who Cancel Short Sale Contracts
In California, buyer's agents generally attach a "short sale addendum" to the purchase contract. The short sale addendum specifies that the entire transaction is contingent upon lender approval.
Those who engage in short sale transactions, including the related "negotiations", and who are unlicensed (and do not have the benefit of an exception/exemption), are in violation of California law. The penalties include fines and/or imprisonment under section 10139 of the B&P Code.
Short sales, like foreclosures, can remain on your credit report for as long as seven years. The silver lining with short sales is that your score is likely to begin improving more quickly, usually in about two years.
In a short sale transaction on the other hand, the seller's closing costs are usually paid out of the money the buyer brings to the closing. Normally, the seller's lender must approve all of these seller closing costs before a short sale can be approved and completed.
Step 8: Closing the short sale
Once your lender has approved an offer, the short sale can proceed to closing. During this step, the title company and escrow agent will handle the final paperwork. You will need to vacate the property by the agreed-upon date, and the buyer will take possession after the sale is complete.
Short sales can damage your credit, and they can stay on your credit report for seven years. You might pay higher rates on future mortgages after a short sale.
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.
However, their credit also takes a hit, and they'll walk away from the sale with no cash for a new home. Buyer: Buyers of short sales might get the home at a reduced price — but the property, in all likelihood, has its share of problems. The deal also comes with more red tape than your standard real estate transaction.
The agent represents the seller, not the lender. In a short sale, the offer is negotiated with the seller, just as in a traditional sale.
Starting January 2, 2025, managers holding short positions exceeding $10 million or 2.5% of a company's shares must file Form SHO on a monthly basis. This measure is designed to increase transparency in short selling, helping regulators and investors better detect market manipulation and mitigate systemic risks.
This is how they work: A con artist buys a property with the intent to re-sell it an artificially inflated price for a considerable profit, even though they only make minor improvements to it.
For a short sale to happen, both the lender and the homeowner have to be willing to sell the house at a loss. The homeowner will make no profit, and the lender will actually lose money for selling the house for less than the amount owed.
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.
Homes inspections are done on behalf of the buyer to give them an out if needed, so sellers usually cannot legally back out of the sale after a home inspection. In rare cases, sellers could be uncooperative and push the buyer into backing out after the home inspection to get out of the contract themselves.
A Short Sale Will Damage Your Credit Scores
Some say short sales have less of a negative effect on credit scores when compared to foreclosures, but this claim isn't necessarily true. Short sales, as well as deeds in lieu foreclosure, are pretty similar to foreclosures when it comes to damaging your credit scores.
In most states, the bank can seek a personal judgment against the borrower after a short sale to recover the deficiency amount.
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.
After Short Sale/Deed-in-Lieu of Foreclosure
Fannie Mae (conventional) loan – 4 years. FHA loan – 3 years. VA loan – 2 years. USDA loan – 3 years.