How Long Does It Take To Buy A Short Sale [TOP]
In a short sale, the process is initiated by the homeowner in order to get out of financial trouble. The owner must prove the extent of the financial distress through documents submitted to the lender. If the lender agrees to move forward, the homeowner is responsible for finding a buyer.
how long does it take to buy a short sale
In a foreclosure, the lender initiates the process, seizing the home and, if necessary, evicting the owner who has failed to make payments. The foreclosure process is generally faster than a short sale, as the lender seeks to liquidate the asset as quickly as possible.
Buying a short-sale property can be a good deal for a prospective buyer. However, it is important to be aware of some of the drawbacks involved. Short sales can take a long time. Moreover, if the bank believes that a foreclosure proceeding is a more lucrative option, it may reject the short sale and move forward with foreclosure instead.
As we mentioned in our article on Florida Foreclosures, the bursting of the sub-prime mortgage bubble resulted in a sad and regrettable reality as the state of Florida topped the list of states with the highest rates of foreclosures and short sales. The situation has been dire for many homeowners over the last many years as they were forced to lose their homes.
While the opportunities in this sector are still present, and in many instances a great way to achieve value, it is important to understand both the intricacies and the process of Florida short sales if you are going to go this route.
A short sale, or deed in lieu of foreclosure, can be defined very simply: where the property sells for less than is owed to the bank. This becomes an option when there is a hardship that requires the sale of a property and the homeowner does not have the ability to pay the difference between the net proceeds from the sale and the amount owed on the mortgage.
To illustrate the challenges in dealing with Florida short sales, we share the story of a property we had listed for two years in a depreciating market. Initially, we had a buyer willing to buy the house for $1.2 million, but the lender was not ready to accept it.
15 months later we worked with a negotiator at the same lender with years of experience who is paid for performance. The difference: We went from contract to closing in 60 days for 280,000 dollars less. Like all things in life, a short sale is all about the people. In this case, the Lender actually wrote off (took a loss on) the additional $280,000 and released the Borrower from the additional monies.
Florida short sales can go through as quickly as 60 days, but more typically take up to six months. The buyer has to be prepared to wait out the process as the bank and the seller hammer out the details of what the lender is prepared to accept.
Financial circumstances can conspire to put just about any homeowner in a box when it comes to paying on a mortgage. It's bad enough when you owe more on your home than it's worth, but having to sell that home for less than what's owed adds insult to injury. Selling a home for less than is owed on it is called a "short sale." And aggravatingly, home short sales can take some time to go through.
There are a few different phases when it comes to conducting a short sale on your home. For one, you'll have to put together a good case for why your lender should approve your short sale request. For another, finding a short sale buyer savvy enough to structure a deal your lender will accept can take some work. Lastly, your lender might unfortunately take several weeks to a couple months to consider your short sale buyer's purchase offer.
Mortgage lenders won't stay in business for long if they lose money on all their mortgage loans. While mortgage lenders consider short sale buyer offers they're mulling over the financial upsides and downsides presented by those offers. Generally, mortgage lenders only accept a short sale buyer offer when the offer makes more financial sense than a foreclosure would. Because mortgage lenders want to minimize their losses on home loans they frequently scrutinize short sale buyer offers closely, which takes time.
Once a mortgage lender finally gets around to approving a short sale buyer's purchase offer, the closing period is usually very brief. For example, it isn't uncommon for a mortgage lender to accept a short sale and demand closing within a couple weeks. In some cases, a mortgage lender approving a short sale has wanted to close within a day of offer acceptance. Once your mortgage lender approves your short sale buyer's purchase offer be ready to close your sale shortly thereafter.
Short sales are sometimes delicate, and lender-accepted purchase offers can be killed by failures to close on time. Keep in mind that your lender might be working on foreclosing your loan even while your short sale is taking place. Mortgage lenders have several different departments involved in their mortgages, including foreclosure departments, collection departments and loss mitigation departments. Sometimes, mortgage lender foreclosure departments try to push mortgage foreclosures while their loss mitigation departments are pushing for short sales.
It's important that homeowners conducting their already lender-approved short sales stay in communication with those lenders. Short sales aren't for the novice home seller, and experienced real estate agents are frequently helpful when it comes to conducting them. Also, buyers wanting to submit a short sale offer need to work to put together a comprehensive offer package to convince the mortgage lender to accept it. Managing short sales takes skill, time and patience on the part of sellers and buyers.
If you've lost your home through a short sale and want to get another mortgage loan, you might be wondering how long you'll have to wait. Your credit score will take a hit after a short sale, although possibly not as much as it would if you had lost your home to a foreclosure. Nevertheless, a short sale will likely prevent you from getting another mortgage right away.
The amount of time you must wait before applying for a new mortgage loan depends on the loan type and your credit history. The chart below shows how long the waiting period is after a short sale for different kinds of loans, with more details below.
You might be able to qualify sooner than three years if you can show that extenuating circumstances caused the mortgage default, like a serious illness or death of a wage earner. Divorce isn't considered an extenuating circumstance. An exception may, however, be made when a borrower's mortgage was current at the time of the borrower's divorce, the ex-spouse received the property, and there was a subsequent short sale. The inability to sell the property due to a job transfer or relocation to another area doesn't qualify as an extenuating circumstance.
Waiting periods can vary for most other types of loans, like subprime or jumbo loans. Some lenders follow Fannie Mae's guidelines. Other lenders shorten the post-short sale waiting period, provided that you make a larger down payment (sometimes 25% or more) and agree to a higher interest rate. You'll also need to have good credit.
Notwithstanding the waiting periods, you must still establish good credit following a short sale to get a mortgage loan. So, your credit scores, usually your FICO scores, must meet the lender's minimal requirements to qualify. Alternatively, while you might be able to get a new mortgage with a low FICO score, you could have to make a larger down payment or pay a higher interest rate.
Review your credit reports immediately if you anticipate applying for a new mortgage following a short sale. That's because short sales are sometimes reported as "foreclosures" on credit reports. If your short sale is reported as a foreclosure, you might be erroneously denied a new mortgage loan because:
Despite improving real estate markets, short sales and foreclosure sales will be with us for the foreseeable future. Many homeowners are still underwater, and at any time in the coming years, these folks may face a situation, such as a job transfer or divorce, requiring them to sell at a loss.
What you can do: Be proactive. The listing agent should call the bank after submitting the short sale package, especially if sent by fax. Confirm that all documents have been received. Make sure to get the name and phone number of the person you speak to.
The short sale waiting periods are determined by the nature of the financial hardship you had and the type of mortgage you are applying for. In general, government-backed mortgages are more forgiving than conventional home loan guidelines. If you had an extenuating circumstance, you may be able to buy sooner than if it was a strategic short sale.
There is also a divorce exception. It requires that the mortgage was current at the time of the divorce, the ex-spouse received the property, and there was a short sale after the divorce was completed. In this situation, the borrower that released their interest in the property had no control over the property and decision to short sell.
In most situations, lenders require that you are in default in order to get your short sale approved. If, you were able to keep the payments current, this program would apply to you. If you had any missed payment, FHA will require a three-year waiting period that is described above.
Waiting periods for both Fannie Mae or Freddie Mac backed loans vary depending on circumstances. Both require a 4-year waiting period to buy another home after a short sale, but will allow for a lesser waiting period with applicable, documented extenuating circumstances. With an accepted extenuating circumstance, there is a two-year waiting period and a 10% down payment requirement.
The typical waiting period to buy another home after a short sale is two years for a VA loan with proof of a re-established credit score. But, the VA does not have a strict guideline for a waiting period, or seasoning period, after a short sale and you may be able to obtain a loan soon. 041b061a72