Question: “I am thinking about buying a short sale home, but I’ve heard the process can take a really long time. So I started researching this online. Then I came across an article that said Congress was taking measures to speed up the process, to reduce the number of people going into foreclosure. Is this true? How long does a short sale take in 2014, from a buyer’s perspective? I’d hate to get bogged down in a transaction that might take several months.”
The good news is that the short sale process doesn’t take as long as it used to, on average. A variety of new rules and procedures have expedited the process. The bad news is that it’s hard to predict how long the process might take, due the variables involved.
If your real estate agent submits a complete offer with all of the necessary paperwork, you might get an approval within 30 – 60 days, or even sooner. In more complex scenarios, the process can take several months. So it might not be the best option for you if speed is a priority.
Why It Takes Longer Than a Regular Transaction
A short sale occurs when a homeowner sells a home for less than the amount owed on the mortgage loan. They are selling the house “short” of the outstanding balance, hence the term. In many cases, it is a strategy for avoiding foreclosure.
But homeowners cannot do this on their own accord. They need their lender’s permission, since the lender will be taking a loss on the deal. This is one of the reasons why a short sale takes longer than a regular transaction, generally speaking. In a traditional sale, the seller / homeowner does not need the lender’s permission because they will pay off the balance in full.
Short sales are also more complicated because multiple approvals can be required. There might be more than one lender involved. There may also be a private mortgage insurance (PMI) company that has a stake in the deal, and therefore some influence over the approval process.
How Long Do Short Sales Take in 2014?
So, how long does a short sale take in 2014? A few years ago, when the housing market was in shambles, the short sale process took much longer than it does today. Back then, the time frame between the buyer’s offer and the lender’s final approval averaged 3 – 4 months.
But it doesn’t take that long anymore, generally speaking. There are several reasons for this:
- Real estate agents are getting better at submitting short sale offers and packages. They’ve had plenty of practice!
- Lenders are doing a better job processing them quickly.
- Lenders today do not have the tremendous backlogs they had during the housing bust. They are not as swamped with short sale requests, offers, paperwork, etc.
- Last year, Fannie Mae and the Federal Housing Administration (FHA) implemented new procedures designed to streamline and expedite the short sale process, on certain homes.
- Some mortgage lenders are now allowing the buyer’s loan to move forward into the underwriting process, before the bank gives a final approval on the short sale.
There has also been a lot of training and standardization over the last few years, where short sales are concerned. So things have definitely improved. I’ve heard of agents getting their buyers’ offers accepted in only two or three weeks, though this is likely a best-case scenario.
If you ask 20 real estate agents how long a short sale takes in 2014, you’ll get 20 different answers. Estimates vary widely. But here’s the bottom line. If you submit a reasonable offer based on comparable sales in the area, and your package is put together properly, the short sale process might take 30 – 45 days. Here, I’m talking about the time frame between the offer and the final approval. If there are multiple approving parties involved, and/or the lender is currently dealing with a backlog, then the process might take longer.
Disclaimer: This article answers the question, How long does a short sale take in 2014? Real estate transaction times can vary from one buyer and property to the next. This is especially true for distressed home sales, due to the additional complexities. This article has been provided for educational purposes only and does not constitute financial advice.