Short Sale Process: Submitting An Offer To The Seller
Just like a regular real estate transaction, if you want to purchase a home that is being sold as a short sale, your first step is to write an offer and submit it 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.
Short Sale Process: Approval Time Frame
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:
Short Sale Process: Withdrawing An Offer
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.
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Hi Lisa,
Your site is very helpful. My husband and I put an offer on a house that has been previously approved short sale for 180K. It has been listed for 165K. We made the offer Sept 11, 2011 for 170K. They told us they have a “sale date” on Sept 18, 2011, so they have accepted our offer the next day. Our offer postponed their “sale date” to Nov. 4, 2011. The seller’s bank is BoA, i know boA has a bad rep when it comes to short sales.. but does it takes into account the sale date? Does that mean if they did not accepted our over they are going to foreclosure? btw, we are at our highest bid at 170K.. and we are hoping to get the house… My agent said we should be hearing something from the seller’s bank tomorrow, but I am not so sure.. Any thoughts about our offer? Do you think we have a good chance? Thank you so much for you time,
Micah
Hi Lisa
We are in the process of a short sale, we submit our offer and the seller approved it. They sent the paperwork to Bank of America and we have been waiting for the approval letter for the last 2 months almost 3 months. The last buyers ha the letter and they walked away because of problems with the inspection. Due to the fact they got the approval letter, our agent suggested to send the same offer with the same conditions in order for the bank to change the letter to our names and the process would be quicker. As I said before it has been almost 3 months and nothing. We were about to walk away from the deal BanAmerica asked us to giving a few more days. Now it has been a week and we seem that agent is not getting any response from the other agent or Bank of America. Please keep in mind that our loan is already approved and waiting for them. Do you know how much more is it going to last this painful waiting??
Thank you !!
An agent list a home in july 2011 for 115900 marked it down nov 2011 110900. I am trying to subit an offer. According to the listing agent she is not sure how that listing price was made, and the property is a “possible” short sale? Other things of concern, the home is occupied and the listing agents sign is laying flat in th front yard, there is only one poorly taken photo shown on the MLS, there is a 2.5 percent BA commission, and from my comps the house is worth 155000. Seems to me the listing agent and sellers are not serious about selling but still have listed it. Why would this be?
Hi Lisa,
We just looked at a “short sale” property in a very nice town (schools, location, community, low crime). The house has been on and off the market for the past 2 years and is now listed as a short sale.
The house is listed for $369,000 as a 4 bedroom, 3.5 bath and notes the ceilings are damaged and will be sold “as is”. The home is assessed for $524,000 by the town. Therefore, we feel like this may be the best chance of getting into this town.
We went to see it and noticed that is only a 3 bedroom and 3 bath and the listing was not correct. When I noted it to the listing agent she said it had been on the market for so long that she did not realize. It does have damage from water and the owners cut a large hole in the ceiling. They also put some holes in the damaged floor to drain any water from the roof (presumably damaged). The floor is also in tough shape in this location. The house has been vacant since February and has been “winterized” (utilities turned off).
While viewing the property we asked if the bank has accepted the list price and she said yes. She also noted that there had been many many offers on this house some as low as $250,000 and the last offer was a cash offer. She also noted the many BPO’s have come back too high.
We ended up placing an offer for $340,000 with $1,000 down after looking at what has sold in the town, the repairs needed and what is listed and wonder what are chances may be.
I have few questions that you may help me with.
1. We will be selling our house to help pay for some of the short sale house. Is this impossible since we may never hear from them and it may take up to a month to hear back.
2. Will the listings agent description of the house (4br,3.5 ba) hurt the BPO?
3. I realize the bank wants the most money possible but are they ever flexible on the price (like our case) or would they rather a forclosure since the towns assessed price is so much higher? The seller has a lien with Chase.
4. Are there any tips or words of wisdom for this process?
Thank you in advance and best for the New Year!
Nick
I viewed a short sale and placed an offer on it. The sellers accepted my offer and took the house temp. off the market to enter the HAFA program to begin the short sale process. It has been four months since they took it off the market and the bank gave their approved listing price and just this past week the listing agent told my agent that the approval package is being sent out and once received they will list it active. I will pay their approved price as that was the offer that I submitted from the beginning. How long is my wait from this point to closing?
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