Q: What’s the typical process when buying a short sale? How long does it take? What are some pitfalls?
A: The typical process is the following:
1. Short Sale package sent to the lender/ Acknowledge receipt (one week)
2. BPO ordered (two weeks)
3. Negotiator assigned (one to two weeks)
4. Valuations/Assessment of the offer and short sale documentation (30 to 45 days)
5. Offer counter/denied/approved (one to two weeks)
6. Sent to investor for approval (if approved) (two to four weeks)
The order that the BPO is completed and the negotiator assigned may differ. Some lenders are trying to do as much work up front as possible. Such as completing a BPO (this is often done every three months automatically with some banks and is kept on file), or assigning a file to a specialist who can expedite the transaction.
The timeframes of each above are general timeframes but, because they are in the hand of an individual, can sometimes be faster or take longer. But in gauging transactions with the above timeline, for the most part, I am seeing files close accordingly.
Some of the pitfalls are:
1. Government programs – The Government implemented programs under Making Home Affordable (HAFA, HAMP, HARP, etc), initially intended to assist the market but created huge learning curves in the implementation of the programs. This had previously created many hangups and snags over the past few years. However, more recently, there has been a significant downturn in short sale lender snags and instead an increase in buyer fall-out due to the buyer’s lender or loan.
2. The Buyer’s lender – Tightening lender guidelines have been a cause of major short sale fallout over the past year.
3. Upcoming election – Because many of the candidates will want to be seen as if they are actively doing something for the people, we may actually see false movement (“the market is recovering” type of talk) that may have a backlash after the election is over.
For the most part, making an offer on a short sale can be a great experience if all parties are well-informed and expectations are set up front. The banks are definitely approving more short sales faster, showing that their processes are streamlining and staff turnover has been minimized. Also, many certifications (CDPE, HAFA, etc) are doing more to make certification more affordable and to educate more agents on both sides (buyer and seller). This is very important.
Short sales are here to stay, for a while anyway. We can’t fear them, we must instead embrace them, and if we go in with a mindset of “there is a solution for everything”, we can succeed in the world of short sales.