A Short Sale is when a homeowner sells their property for less than the outstanding balances on the obligations against the home (past due mortgages, HELOCs, etc.). If a homeowner can’t continue making the mortgage payments and the balance due is higher than a home is worth, a short sale may be a better option than foreclosure. While not ideal, it is less damaging to the homeowner’s credit history and offers potential benefits over a foreclosure.
The process can be complex and has many moving parts. While difficult to estimate accurately, a typical Short Sale can take from one to six months to complete. However, more complicated cases may take longer.
A short sale will most likely take longer than a traditional sale for one simple reason: communication. Nearly every step in the short sale process requires the homeowner to communicate with the bank for one reason or another. Because of this, there is a lot of back and forth, and even more waiting for things to be resolved. It can take as long as four months for the initial lender to even approve a short sale.
Because banks will only allow borrowers to conduct a short sale as a last resort, they are going to ensure that a short sale is the only logical choice before they proceed. Lenders have no problem taking their time to make sure they are making the right choice, as there is a lot of money on the line. Only once they are certain a short sale is in their best interest will they move forward with the process.
Once a homeowner receives the green light, they are expected to sell the home themselves. Because the housing market is unpredictable, it’s difficult to anticipate how long this process might take. And remember, the time it takes to actually sell the house is in addition to the time spent seeking the bank’s approval in the first place. Even in the best-case scenario, the average homeowner is already looking at three to four months to sell their home.
After receiving an offer, the homeowner must have it approved by the lender before they can move forward, which will tack on more time to the short sale process. If they are lucky, the banks will simply accept the terms of the offer. However, there is a chance more negotiations will be required, further prolonging the process.
The short sale process has become common practice for homeowners with less than perfect financial standing. Of course, no homeowner is happy to find themselves in the position to conduct a short sale, but the fact remains: short sales have proven beneficial to everyone involved. The seller no longer has to live in fear of a foreclosure, the bank can retain some of the money they would have otherwise lost in a foreclosure, and there’s a good chance the buyer will end up with a great deal.