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Short Sales (and Why They Take So Long)

By Malcolm Rivers

A short sale is, in the simplest sense, a sale at a loss. Both the lender and the seller must decide that selling the property at a loss is acceptable and the superior option to defaulting on the loan. The fact is that this arrangement can be beneficial to both lender and borrower due to damage to the borrower's credit and to potential fees for the lender. These types of sales occur because the loan used to buy the property is greater than the sale price, when all the fees are factored in.

Banks

The Banks to which sellers are beholden must approve the short sale and, given that the banks are opting to sell a home for a lesser price, there will be significant obstacles in making the sale. These banks have involved, extensive processes for approval of short sales, given the situations in which short sales occur and would be beneficial for the seller and the lender.

Banks must also do their research before providing a short sale approval to a lender. The bank must review the short sale package which includes bank statements, credit history and other essential information about the seller which will provide an understanding of their finances, ensuring that the seller is in a position which would make a short sale in the best interests of the lender. Reviewing these documents can take time and going through the process can be hindered by forgotten documents and the like.

Listing agents

Buyers and their agents have no control over the timeline or success of a short sale. Good listing agents will make all of the difference and ineffectual listing agents can make mistakes which can result in additional delays in the process. Inexperienced or ineffective listing agents can mix up documents, lose track of timelines or give incorrect advice on any stage of the process which can set the progress you've made back.

Documents and Logistics

In the process of a short sale especially, and in real estate deals in general, documents can lose pages, contain typos or become damaged or lost over the course of the deal. If, for example, one page from one document, from the thousands of pages of documents, is missing the entire process can be derailed or set back significantly. One or more documents may not be processed due to missing pieces and the documents may have to be resubmitted for processing.

Additionally, during the process of working on obtaining a short sale approval from a bank, a document may, in fact, become outdated while the rest of the process is being undertaken. This would mean more documents to resubmit and for which to await approval.

Additionally if the seller has multiple loans, each lender will have to engage in similar, if not identical, paperwork, making the process considerably less efficient and much more time consuming. Banks may, depending on their interest, simply choose to kill the deal for a variety of reasons, which is well within the scope of their rights in the situation.

Foreclosure considerations

Foreclosure departments at the banks may not be working in conjunction with the those engaging in the short sale and thus may have a deal on the table that expires because the house goes into foreclosure before the short sale can be completed and thus is no longer the property of the seller.

Suggestions for Speeding Up the Process

Being proactive is your best bet. Keeping track of timelines, schedules and the like is essential. Following up regularly with your listing agent(s) and your lenders is crucial, to avoid missing important updates keep documents up to date and resubmit when necessary. Providing and seeking as much information as possible on requirements, dates and parts of the processes can make a huge difference in your timeline and success level. Also, make sure to keep in mind the lender's bottom line, hire an experienced professional to assist with the process and, as always, do your research to make the best decision for you and your family.

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