There are many upsides and downsides to purchasing a short sale. On one hand, you can save some serious cash (anywhere from 15% to 35% of the purchase price).
The downside is that short sales can often take longer than a traditional sale. They also come with their own unique challenges. Here are some of the factors that go into determining how long a short sale will take.
Does the Homeowner have PMI?
Private Mortgage Insurance (PMI) is an insurance that most homeowners pay that basically guarantees the bank that they’ll get paid a certain percentage of their mortgage should the property go to foreclosure.
Often times, banks would make more money by letting the home go to foreclosure and collecting their PMI check, instead of letting a short sale go through. If the homeowner was paying for PMI, this adds a layer of complexity to the deal that can complicate and lengthen the process.
The Homeowner’s Co-Operation
Unfortunately, the homeowner’s co-operation can often make a big difference in how long the short sale takes. How thoroughly and quickly are they submitting their paperwork? Are they willingly allowing realtors, inspectors and buyers see their home? Are they in communication with their lenders?
How Many Lenders Are Involved?
A short sale deal must be approved by all lenders involved. Each lender will have their own criteria and their own process. Short sales are complex enough with just one lender. With more than one lender, the process often takes much longer.
The Banks
There’s a somewhat random factor in the short sale process that is basically “However long the bank takes.” Banks weren’t originally setup to own and manage property: They were setup to own and manage money and loans. Banks are often overloaded with contracts and deals to look over and approve or disapprove.
In other words, it may have nothing to do with your deal: The bank’s stack of deals to review could be all that there is holding up the process. And there’s not much to be done about that.
The Bottom Line Is…
With purchasing a regular home, you might have one or two rounds of negotiations before a price is set. A short sale on the other hand, usually takes weeks, if not months. A 6-8 week timeframe is considered fast for a short sale. It could take as long as 6 months, sometimes more.
In the end you could save money by purchasing a short sale but the process is more complex, deals can fall through at the last minute and there’s usually a long wait.
Call one of our short sale experts at (480) 331-2832
Comments on this entry are closed.