How long does a short sale process take?

by Joe Salcedo on 5:16 am

The best way I can answer this question is to divide it in three parts:

  • Listing the house and finding the right buyer.

  • Negotiation phase.
  • Closing process.

In my experience, the whole process from start to finish takes about 3 to 6 months, about 90-180 days.

1) Listing the house and finding the right buyer

This is where the first major delay takes place — PAPERWORK. Lots of it. It’s been 50-50 for me; about half of my past clients deliver all the required documents on time, and the other half, gets delayed. There was a time where real estate transactions took an hour worth of meeting and 9 pages to sign. Trust was manifested in how little disclosures people had to sign their names on.

Now, it’s about a total of 3 hours worth of ‘meetings’ and two inches worth of paperwork. The first time clients call lasts about one hour, and that’s just to let them know what I need from them, set expectations (“Sir, this process could possibly drag on for a while”), and answer frequently asked questions about short sales and documents they’re signing (required by the bank):

  • Authorization to release information form
  • Hardship letter
  • Financial Information Worksheet
  • Listing Agreement
  • Tax returns (2 years)
  • Bank Statements (last 2 months)
  • Pay Stubs

There are also documents clients need to sign between us that the state and our brokers require (listing agreement, disclosures, addendums, duties owed, etc.,)

The listing process usually lasts between 30-60 days. In general, it is smart to initially price the property at a true ‘fair market value’ for the property type and neighborhood comps. A ‘comp’ is based on a ‘survey’ of the most recent sales usually within a few mile radius; also included in the ‘comparables’ are conventional listings, short sales, and bank owned properties.

After 2 to 3 weeks, you want to lower your price on a regular basis (if you’re not getting enough interest on the property).

There are two reasons for this. First, you want to demonstrate to your lender that you have tested each price point, that you tried to put the most cash in their pockets. Second, there is no value in having your short sale property priced too high. Nothing can happen until you have a buyer.

2) Negotiation Phase

Once you have your property under contract, the negotiation phase begins. The negotiation takes place between two orbits: listing agent to buyer’s agent and listing agent to bank negotiators. It’s worth noting that Bank of America has greatly improved their system through equator, but not too long ago it used to take months just to get a hold of the bank’s go-to guy who can approve or reject your short sale.

Depending on who your lender is, and how many loans there are on the property, this phase can take between 30-90 days. Sometimes it takes quite a bit longer, but in the end, an approval or rejection is received. ‘Rejection’ usually means the banks are asking way too much money from the home owners. Money that they normally don’t have.

3) Closing Process

The last phase is the closing period where buyer’s mortgage loan gets processed, inspections and appraisals ordered and reviewed. This should take no longer than 30 days. However, I’ve had numerous experiences where the buyer’s financing is not in order, and the closing process is delayed.

In the end, nobody can guarantee that a short sale can be done in a fixed time period. It is simply best to be patient, choose who you work with carefully, and trust that they are doing everything possible to help you settle your accounts in the most favorable terms, and in the quickest manner possible. And more often than not, you will experience a successful short sale process.

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“Joe’s your man if you need someone to trust. Joe Salcedo is a hard working Realtor. Joe is very professional and will go the extra mile.”

– Philip Duane Johncock

“I was laid off from the state in November of 2007 due to major budget cuts. We were no longer able to make our house payments as the job market was just beginning to get worse and worse. My agent in San Jose found Joe Salcedo in Reno for me and told me he has a lot of experience in short sales. He priced our home at a very realistic price in relation to the market values at the time. Joe was very professional and before we knew it we had an offer on our home. In September of 2008 our home closed and the bank forgave the difference. A short sale comes off of your credit in a much, much shorter time than a bank foreclosure. We will be forever grateful for the assistance of Joe Salcedo”

– James and Marsha McGinnis (feel free to call for a reference, Joe has my number)

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