Short Sale Process: Submitting An Offer To The Seller
Questions to ask your agent before submitting a short sale offer:
- How experienced is the selling agent with short sales?
Getting a short sale to close takes a lot of time and hard work. Experienced short sale agents know the process, usually have good communication with the asset managers, and can give you an idea on the amount of time it will take to close.
In-experienced short sale agents may be in over their heads and getting the short sale to close becomes more difficult. In this situation, you may want to talk to your agent and to see if they are familiar with the listing agent. If they feel they can get it done, you may want to move forward anyways.
- What liens are there on the property?
If the property has multiple liens against it, getting the short sale approved can be difficult at best. More then likely, a property with multiple liens will take an extended amount of time to get to close, if it even closes at all.
To find a lien on a property, you can check with your local courthouse or ask a title company to do a preliminary title report. Ask your agent to help you with this task or call a title company in your area.
- Are there any other offers?
Ask the agent if there are any other offers you will be competing with. Most agents won’t tell you what the offer amount is, but knowing how many offers are on the property will give you a better understanding of where you need to write yours at.
- Has a price already been approved by the loan servicer?
If you get lucky, the short sale may already have a price the bank has approved. This scenario happens when a buyer has already submitted an offer, has gone through the approval process, but walked away before closing for one reason or another.
If the bank already has an approved price point, it can shorten the process depending on how long ago the price was approved. If it’s been awhile the bank may require you to go through the approval process again.
If all these scenarios check out in your favor, it may be a good idea to submit your offer. First, your offer has to be approved by the seller. If the seller agrees to the terms of your offer, they will then submit it to the bank for approval. Next is the approval process from the bank.
Since getting an offer approved for a short sale is a process that requires a third party approval. It’s going to take longer then a normal real estate transaction. Here are some common questions many short sale buyers have:
- How long will the lender take to approve my short sale?
This really depends on a lot of factors. Number one is who is the servicer? For example, Bank of America is one of the worst, and it can take sometimes upto 4 months to get an approval. Wells Fargo on the other hand is a lot more organized and usually can get an approval within 30-45 days after submitting the offer.
The time frame also depends on if the bank has already approved a price. If the bank has already approved a price point, then you know where to write your offer and you can skip the counter offer process. If they haven’t approved a price they will usually order an appraisal or a BPO (broker price opinion) to be done on the property which takes more time.
- What is the average time frame from start to finish buying a short sale?
Average is usually 3-4 months depending on your qualifications as a buyer. If you have cash, once the approval from the bank is completed, you can close in a couple of weeks. If you have to get financing, depending on the type of financing you’re getting, the time frame from bank approval will be an extra 30-60 days. The longest amount of time I have seen it take to get a short sale done was 8 months while the shortest was 35 days on a cash offer.
- Do I still have time for my due-diligence timelines and financing?
Yes. Once you have approval from the bank, they usually give you a certain amount of time to do your due-diligence. You get plenty of time to do your inspections to determine if you still want to buy the home.
If your inspection shows there are problems with the home you might just have to walk away. Most short sales are sold as-is. If the problems are bad enough sometimes you can re-negotiate with the bank. They may reduce the price in order to compensate for repairs.
The bank will give you time to get your financing completed, but if you go over your deadline, you can still ask the bank for an extension. Most the time financing deadlines can be extended if you run into any problems, just talk to the listing agent and ask for an extension.
During the short sale approval process, many buyers get anxious and decide to pull out. Sometimes you just find a better home and decide you want to write an offer on that home. Other times a buyer will have no other reason then cold feet. You can withdraw a short sale offer for a number of reasons:
You can walk away at anytime up until the bank accepts your offer. Once they accept your offer you can still walk away based on your financing deadline and your due-diligence period.
- How do you withdraw an offer on a short sale?
To withdraw, just contact your agent, and tell them you want to withdraw. It’s that simple. They will notify the selling agent that your offer is no longer on the table and that’s it.
- What are the possible consequences of withdrawing a short sale offer?
Really, the only consequence you will face is lost time. When you submit an offer on a short sale, you can ask your agent to put in the contract you will submit earnest money at the time the bank approves your offer. Once you submit your earnest money, you still have your financing and due-diligence deadlines to withdraw before you lose your earnest money deposit.
Once your due-diligence and financing deadlines are over, that’s when you can lose your earnest money deposit. If you withdraw after those time periods, you automatically forfeit your earnest money. It’s up to you to decide if it’s worth it to lose your earnest money. If you really don’t want to buy the home, losing a $1000 in earnest money might be better then living in a home you hate.