Usually when a new short sale property comes on the market, it is done as an offering from the current home owner through a Realtor. The bank has normally not yet been notified and so at this point, if all goes well, it will be 4 to 6 months before it will close. If the bank has approved the short-sale, the time frame will decrease by about one third or more.
The steps can be fairly drawn out but in short, here they are:
1. The seller (home owner) must first qualify for a short sale. In other words, the seller must prove to the bank they cannot make the payment. After filling out all the paperwork and providing the bank with all their requested documents takes a minimum of 6 weeks.
2. If approved for a short-sale, the file is sent the short sale department. It will be about 1 month before the file on the property will be begin to be processed. There is no time frame here on how long that will actually take.
3. Then once a processor acknowledges the file is complete and every box has been checked and all documents are in, it goes to the bank’s Negotiator. This step takes more than a month.
4. Once the negotiator has it and has placed it into their work flow, it takes 2 to 3 weeks for the negotiator to order an appraisal. This takes an additional 2 weeks to get that ordered and back to the negotiator.
5. Then if everything checks out, it then goes to the Investor (the entity that actually owns the mortgage). The investor is the final person that OK’s the sale based upon the amount to money they are willing to loose and if they believe the property was aggressively marketed. They also must approve that the price is the fair market value which all in all takes at least a month.
6. Once all of this is done and accepted, an ordinary escrow will be allowed to open. The escrow for a cash deal will be at least 21 days. For other deals where a loan is involved, you must allow for a 30-45 day escrow.
7. During escrow, other things can happen that may affect closing. Anything from an issue with Title to problems discovered during buyer investigations that include a home inspection and review of other reports such as HOA docs. Any problems uncovered may be cause to extend the escrow period.
When all of these issues are resolved or when escrow is completed, closing will proceed and title will transfer.
So now you know. I’m not trying to discourage anyone from buying a short-sale. Rather its important to note that the process is long and may not be for everyone or anyone who’s in a hurry to own.
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