A 3rd party broker that specializes in mortgages guaranteed by the US government

How Long Will It Take To Buy A Short Sale?

If you are in the market for a home and are considering a short sale with multiple lenders/lien-holders you may want to prepare yourself for a long process.

short-sale-timeAs a result of the recession, many homeowners who are facing foreclosure owe more than their home is worth. When these homeowners need to sell their property, the best option (and in some cases the only option) for homeowners in this predicament is a short sale.

A short sale is where the home owner sells their home for less than the amount that they owe. The negative equity is assumed and/or written off by the lender. In doing this, the homeowners bad debt may be erased. This is advantageous for the seller in that they do not have a foreclosure on their credit report and they are able to stay in their home for a while without making a payment.

In many cases where there are several different lenders, the short sale process can take up to 12 months. This is caused by the multiple negotiations between the lenders, escrow and the Realtors. Depending on when the buyer makes an offer, they may find themselves in for a long wait.

To make matters worse, some short-sales will never close escrow due to a variety of reasons (mistakes, loan denial, contract cancellation, etc etc).

Although they can be quite a quagmire, the buyers that have good timing will discover that short sales can provide deep discounts and overlooked value. In fact, short sales are so notorious for value, many investors are leaving the stock market, specifically opting to invest in short-sales and foreclosures.

The reasons for this are as follows:

Many short sale, pre-foreclosure properties are in need of updating or have deferred maintenance. An outdated kitchen or bathroom may not be appealing to many buyers. If the home is located in an area where first time home buyers have several options, they will most likely choose the newest and/or nicest home available. Properties that need updating are often sold for less than they would be if they were updated. Investors look for these types of homes because they can fix and flip the home.

The lenders that make the final sales price decision are often motivated to sell short sales at below market pricing. When a property is on the market for an extended period of time, the lien-holder will often lower the net payoff. This in effect can lower the price of the home. Because some short sales will take 12 months or longer, it is not uncommon to see short-sales with substantially lower prices than what the home was originally listed for.

Buying a pre-foreclosure home can be a great investment. Cash investors are not the only ones able to purchase homes to fix and flip. VA loans are also being leveraged to purchase short sale homes. The requirement for a VA loan is that the home must pass VA inspection prior to the close of escrow.