Real Estate Tips and Info
Why Short Sales Take So Long
Why do short sales take so long? It's a loaded question with no easy answer. Short sales have long been transactions that banks go to great lengths to avoid. After all, who wants to be repaid a portion of the money they've loaned out. Of course, lenders were forced to become more open to short sales when the housing market collapsed, because of the overwhelming number of underwater homeowners. Banks had to accept that it's better to take less than borrowers owed than to foreclose on the property and get even less than that in a foreclosure sale. Even with the market recovering, however, millions of Americans still owe more on their home loans than the homes are worth, so short sales are likely to continue as a viable option for many borrowers for several years to come.
Simply put, a short sale is when a homeowner's lender agrees to let the borrower sell his home for less than the home is worth. Borrowers usually strive for a short sale when they can no longer afford their mortgage payments and they owe more on the loan than the home is worth. These borrowers are unable to refinance, because they're underwater, and consider a short sale their last chance to avoid a foreclosure. While they have become more open to short sales in recent years, banks are still leery of short sales. That's often why they take so long, as banks take their time in approving a short sale, even if the seller and buyer already have an agreement in place.
How quickly a short sale closes, and whether it closes at all, are heavily dependent on the seller's agent. An inexperienced agent might miss key elements in the short sale package for the lender, or make other mistakes that can delay or even derail the process. Banks often take more than a month just to respond to a short sale request, so it's very important to get the package right the first time. A short sale package usually contains several hundred pages of documents, and delays can stack up if any of those documents are outdated, erroneous or missing signatures. The issue becomes even more convoluted when there's a second lender involved. The best way to avoid these types of delays is to make sure the listing agent is fully versed in short sales. An experienced agent will not only know exactly how to put together a short sale package for lenders, but will also be proactive, preparing follow-up documents in case a lender requests more information before granting the short sale.
Understanding Short Sales
More Real Estate Advice