Once a “short sale” finally goes under contract, how long can you expect to wait for a lender’s decision? A recent Deutsche Bank study looked at the short sale approval process of mortgage servicers. The report found that time frames vary by loan type.
For prime loans, GMAC completed short sales the fastest – averaging roughly six months per transaction. Citigroup’s CitiMortgage took about seven and a half months. Wells Fargo averaged 8 months. Bank of America took 11 months. Countrywide, acquired by Bank of America, had the slowest timeline averaging over 13 months.
For subprime loans, Wells Fargo had the shortest timeline at just over 15 months, whereas Ocwen and Equicredit took 29 months.
For Option-ARM loans, transactions took anywhere between 8 to 13 months. See article for details.
As a CDPE (Certified Distress Property Expert) who has had over 70 short sales approved in the Tampa Bay area, I have a few comments on the study. When we submit a contract to the bank, we are assuming that the buyer will wait patiently for months without any substantive news along the way, and without any indication that the seller or the price will be approved. Short sale contracts are approved on a case-by-case basis for a specific contract with a specific buyer. Short sale approvals are not assignable to another buyer.
About half of the time, we noticed that the buyer would wait a few months and then cancel the contract because they became impatient or they found another home. When the contract is canceled, we must put the home back on the market and look for another buyer. We do not gain any benefit with the bank, as they will start the process over from the beginning the next time.
Once a home enters the market, it may require a series of price reductions and a couple months to find a buyer. If the buyer cancels after 3 months, then we would have already burned 5 months that we will never get back.
After the cancellation, it may take a month to find a new buyer, then another 5 months for the bank’s decision, and one month to close. At that point we would be 12 months into the game, right up against the foreclosure timeline. And what happens if the 2nd buyer cancels? We have seen up to 4 buyers cancel on the same home, each after waiting 3-6 months. At that point, we are in a race against foreclosure – every day that goes by is precious.
How can we keep the buyer engaged in the process and reduce the number of buyer cancellations? While some cancellations are inevitable, Team Bohannon has developed strategies to speed the process, keep the buyer informed and increase the odds that buyers will remain committed to the transaction for the duration. Call Dale Bohannon today at 813-979-4963 for more information.
