After writing a few blogs about short sales, I have been bombarded with questions, and I figured it would be easier to write a blog post with as many answers as I can give saving you and me time. So here we go:
Answers To Common Short Sale Questions
- What is the average time frame for a short sale approval?
There really is no answer to this question. There are way to many variables involved. If you’re a buyer that is looking to buy a short sale, the time frame depends on the bank approving the offer you submitted and your financing.
If you’re trying to sell a short sale, the time depends on you finding a buyer that is willing to stick around long enough to get the short sale approved by the bank.
Basically, short sales take time, and no one knows better then your agent when your short sale can be completed. The key to a short sale being approved is patience with all parties involved.
If you’re a buyer, don’t put an offer on a short sale unless your serious, otherwise your just wasting everyones time.
If your a seller, be sure you hire an agent that is well versed in the short sale process. This is no time to use a friend just because they’re a friend. You need to get a solid short sale agent.
- Will a cash offer make the approval time go faster?
No! A cash offer won’t make the approval time period go faster. The approval time period of a short sale will be the same whether you have cash or not. The only thing that changes is the amount of time for a buyer to get financing. The faster you have money the faster you can close AFTER your offer is approved by the bank.
- What should I offer on a short sale?
This is a tricky question and there’s three parts. First, you need to know if the short sale has an approved price from the loan servicer. To find this out, you need to talk with the sellers agent, or have your agent talk to them for you. If the bank has a price they have previously approved, you won’t get far offering lower then the banks price.
Second, if the bank hasn’t approved a price, find out how many offers are on the home. Many times short sale agents will price the home under market value to get some bites. Depending on your market, I have heard of short sales with 10-20+ offers on them! If you wanna play that game, then go ahead and submit an offer where you feel comfortable. Have your agent pull some comparable’s so you know what the home is worth and make an offer based on that data.
Third, how much can you afford and how badly do you want that house? If you don’t want to lose the home, come in aggressive with your offer. If you’re just trying to get a great deal, come in low, and see where it goes. If you come in low, and there are multiple offers, you can expect to lose out. Be careful with your offer, pull comparable’s, and be prepared to pay for the home. You aren’t going to get it for free!
- My short sale is approved what next?
If you’re a home seller facing foreclosure, this may be the best thing since sliced bread! Once you get your short sale approved by the holder of your loan, you can move forward with the selling process. Your agent will then put your home on the market and all you can do is wait for a buyer to submit an offer before your next step.
Once you get an offer, you will have to approve it, and then you can submit the offer along with your paperwork to the bank for their approval. If the bank approves the offer and the buyer attains financing, your home is sold! Of course there’s a lot more to it then that, but you get the idea.
- Should I get a home inspection even though the short sale is being sold as-is?
Absolutely. A home inspection is the best money you can spend on a real estate transaction. If you find serious defects on the property, are you still going to pay the price you offered? Even though you may not be able to convince the bank to make repairs, you can usually re-negotiate your offer price to compensate for repairs.
If the inspection shows major problems that you weren’t prepared for, it might be a good idea to just walk away. Spending a few hundred dollars on the inspection can save you thousands.
- What happens if the buyers walk away after short sale is approved by the bank?
Being the seller in a short sale is difficult. You are subject to the bank and whatever they deem fit. If the bank takes a long time to get your approval, buyers may start getting antsy.
Depending on your state, buyers can walk at a number of times during the short sale process. If the bank takes to long to approve the short sale, a buyer can walk. If the buyer learns there are multiple offers, they might walk. If the inspections show problems, they walk. If the appraisal is low, they may walk.
These scenarios can leave you, the seller, panicking on a daily basis. If a buyer walks, you may end up getting foreclosed on if you haven’t been making payments. Other times, you may be able to move onto a back up offer if there are buyers waiting.
If you don’t have any backup offers but the bank has approved a price, have your agent update all their advertising. You will want to advertise you have an approved price from the bank, and this should get you some nice activity again. If the approved price is a good deal, you should be able to find a buyer.
Do you have any other short sale questions? Leave a comment and I will respond promptly. If you need further short sale information, check out my post on the Short Sale Process.
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{ 22 comments… read them below or add one }
Hi,
I made an offer on a unapproved short sale. I signed a contract with the owner of the house for $200,000 cash. The house had been listed for $275,000, reduced to $250,000.
There are three other offers on the house all higher than mine. My Realtor is the same as the Seller’s Agent. This Agent said the bank does not want to see any other offers only mine since I have a signed Contract. It’s now with the negotiator (Wells Fargo as servicing agent) who will present to Fannie Mae. My big question is, do you think the Bank will look at my offer and then ask if any other bids have come in and want to see all of them? The other offers are:
$250,000 subject to securing a loan and all inspections…I waived all inspections and put down $80,000 with cash balance at close of escrow.
offer #3 $215,000 cash
plus two other offers of which I know nothing about.
The Broker is telling me he is very confident the Bank will accept my offer as he knows that the BPO came in lower than my bid.
I don’t want to waste any more time if its a given the Bank will want to see the other bids, it certainly seems logical to me.
I look forward to hearing from you.
Cordially,
Joyce Clark
Hi Joyce,
My best advice to give you is to listen to your agent.
One thing I want to say is, it all depends on what information the listing agent has given the short sale negotiator. If they told the negotiator there are multiple offers, they may want to look at all offers. Sometimes they want to see multiple offers or sometimes they just want to see one.
However, just because an offer is higher than yours, doesn’t mean the bank will accept it. They look at all terms of the offer, and your large down payment is something that gives you a strong position.
To be honest, you never know what happens with a short sale until all things are settled. If you truly love the home, it may be worth it for to wait for the dust to settle. If you’re getting cold feet, withdrawing your offer might be right for you. Ultimately, the decision is yours. Sorry I couldn’t be of more help. Best of luck and thank you for the comment.
Lisa Udy
Ethics are inportant. This agent is putting the seller at risk just so that the commission does not have to be split. Greed can be a problem at approval/negotiation time. Remember when Wells Fargo feels that this transaction does not service them or Fannie, it could be rejected. Long, long wait just to end up with “0″. Unethical agent only serves him/herself. Beware!
We are in the process of a short sale and when we went to do our inspection we notice that they took all the ceiling fans with them. We did not know they were taking them. I’ve talked to a few people and they are telling me that they werent allowed to take them. What is the real answer to this?
Danielle – It depends on what’s in the contract. If they were attached to the house they should stay unless otherwise noted in the contract. If they specified in the contract they would take them, they normally would have had to replace them. Talk to your agent about what’s in the contract you signed, what the inclusions were, and what the exclusions were. Hope this helps!
I’m the seller in a short sale currently. We have an offer and I believe the paperwork has already been turned over to “the negotiator”. I have been told that our lawyers are trying to close asap, but have also been told that we might need to wait through mid-January. With the holidays coming up, should I anticipate a rush to get it done or a longer delay? Also, what sort of cash do I need to have on hand at closing, if any?
Going to do a cooperative shortsale, can a investor purchase the home and rent it back to me ?
If peolple pay private mortgage insurance for years and years and then get into a situation where they can no longer afford their home wouldn’t you think mortgage insurance would come into play somehow. A short sale with PMI is harder to get approved. I have a hard time understanding that. Is PMI one of the biggest scams going?? Any thoughts
Hi Toby – PMI is insurance that makes up the difference if a borrower puts less than 20% down. So, if a borrower defaults on a loan and they only put say 5% down, 15% of the loan is insured and paid to the borrower. This allows people to buy homes for less than 20% down. A loan with less than 20% down is a bigger risk for banks as the home buyer has less skin in the game. Is it a scam? I don’t think so. Everyone is educated, at least in my transactions, what PMI Insurance is and why they need it if they can’t do a 20% down conventional loan.
I notice others have asked about the buyer being able to withdraw from a contract at any time for any reason. I need to go a bit further. Here is my question. Can a buyer back out of an as-is sale at any time for any reason also. If so, please explain the differences in these.
Buyers can’t just withdraw at anytime. There are certain dates in a contract that allow a buyer to perform inspections, appraisals, and other contingencies based on the contract that is signed. If you’re within those dates as a buyer, you can walk away based on those contingencies. If the home is being sold as-is, the buyer still has a right to inspect the property. If they find defaults they don’t want to deal with, then yes they can still walk away based on the inspection contingency.
Being sold as-is means that the owner either a bank or the homeowner themselves will not pay for any repairs. It doesn’t mean that the buyer has to buy the home even if there are defects. The buyer still has the ability to walk away if they deem the necessary repairs out of their comfort zone. Hope this helps!
It does! I will pass on the info to my buyer.
Thank you Lisa,
Tina
I am the buyer in a shortsale here in NC and my offer has been accepted by the seller but not the bank. I’ve had all the important inspections and have determined my offer is too high based on the cost of repairs needed to bring the property back to a good maintenance status (lots of wood rot, replaced of all windows with once exception, chimney flashing repairs…etc. etc). I would like to go forward but not at my orignially offered price. Since this is an ‘as is’ sell, can the offered price on the current contract be renegotiated or should I terminate and resubmit an new offer? I am still within my due diligence period during which I can terminate for any reason. And if I do terminate and resubmit a new offer does the short sale process ‘clock’ reset to the beginning? I have tenants ready to lease the property as soon as I close that I may lose if closing occurs much later than the current offer states. Thank you for your answers. Cherry Houston
If you already have inspections and there are problems, i would definitely cancel your first offer and re-negotiate the price based on the cost of repairs. You can also just submit an addendum to the original offer price with your inspections as a valid reason to re-negotiate the offer price. Best of luck!
I have been reading a lot about problems with short sales falling through and lenghty delays in the processing. From the banks perspective, who is considered the “customer” in a short sale? It appears that banks should be motivated to unload their bad motrgages thus why are they so delinquent in processing valid short sale offers? We are 8 weeks into our short sale bid and are patiently awaiting any communication from the seller’s agent on the status of the offer.
The customer is you the buyer, but again short sales depend on many factors. They have to track down the original owners of the mortgage and sometimes there can be multiple investors. Depending on the investors in the loan, it can take months to determine if they are willing to sale the home short. You also have to consider the amount of short sales banks have to deal with. Many times banks are understaffed in the short sale department and therefore the process can be delayed even longer.
If your trying to purchase a short sale home and the sellers already signed the contract and accepted the offer, but the bank has not yet, Can another party come in and place a bid?
Yes they can place a bid, but their offer will normally go into backup position. Keep in mind, however, that a sellers agent’s responsibility is to sell a home for the highest possible price and find the best possible buyer. If the agent wants to submit multiple offers to the bank they can, but most banks don’t like to deal with more than one offer. If you’re in first position and you abide by your contract, you shouldn’t have to worry.
I have a contract on a short sale property and I currently own a small codo. i do not whant to keep my old condo and my intention is to short sell it after I buy the new property. The new property is an upgrading for me and I will not be able to sell nor rent the old one due to the place conditions [ruf issues etc ] .will the bank approve me for a short sale sice i have bought another property? Are there any tax consequences ?
I have an accepted offer on a shortsale house. All conditions have been met on my end. I have been ready to close now for two weeks . I am told the bank is busy and backed up.Is there anything I can do to speed up this closing? Sincerely, Almost Homeless
I put an offer on a short sale and we’re waiting for the bank to approve it. It’s been two months now. Once we get the house, we planned to live in it for a while, then eventually rent it. We just found out that the city we’re purchasing the house in just passed a law that limits the rentals per block. And the house is in a block that’s over the limit. This is a huge problem, because we don’t want to be stuck there. Can we pull out and still keep our earnest money? Can anyone come after us if we pull out? We don’t know what to do. In 40 days is our “walk away scott free and keep earnest money” date. Should we wait for this?
I am a seller with a primary home paid-off (free and clear), which worth $200,000. I have very minimum income ( enough to cover my primary home’s property taxes and monthly utilities ). If I wanted to short sale my investment home (market value is $140,000) due to no rent payments for the last 6 months, will this be possible? Do you think the bank will come after my primary home?