While looking for a home, many of you may have notice the massive number of short sale properties that keep popping up for sale here in San Diego County. The number of foreclosures coming on the market has slowed and that means that more and more home buyers are now putting offers on short sale listings. This is great news for the economy since these properties are normally listed a bit higher than foreclosures, which means higher comparable sales for the neighborhood. On the downside however, don't expect to close escrow very quickly even if the price has been approved by the bank.
Generally speaking, banks don't have much to discuss with anyone until an offer is being presented, which in this market can sometimes be months. So what is the process and why does it take so darn long?
Well, it starts out with sending an offer and completed short sale package to the lender which includes a sellers financial information, a letter explaining their hardship and a closing estimate based on the offer. Once this information is received by the lender, the process has begun. This first step of sending the completed short sale package can take up to 3 days for it to be uploaded into their computer system for review.
Once uploaded into their system, a short sale negotiator will be assiged from within the bank in order to review the information and to order an appraisal or BPO (broker price opinion), which involoves someone going out to the property for an evaluation of the homes value. This part of the process can take several weeks to a month to get completed.
Once completed however, the negotiator with then review all the sellers information again, along with the appraised value and the outstanding loans to determine how much of a loss they will incur by selling the property short. If the negotiator feels that any piece of the puzzle doesn't fit, they can and will decline all offers. If everything looks good, then they will usually send the file to the investors or to bank management for final approval. This process of review and final approval can take anywhere from a few days to a month depending on how backed up they are. However, once the price the bank will accept is approved, then a letter is sent to the sellers agent and escrow can be opened.
Short Sales requires patience by all parties involved and includes lots of phone calls to the lender for progress updates. From our timeline above, we can see that it can take anywhere from as little as 60 days to several months. Unfortunately, this is just the reality of the market and there isn't much your real estate agent can do to expediate the process. The other thing to mention is that nothing is guaranteed, so make several offers and instead just focusing on one.