It’s a question many real estate agents hear from clients: Why do short sales take so long?
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.
Even if you’ve made an offer and the seller has accepted it, it’s not a done deal. The seller’s bank must approve the sale, and this is where the big delays can happen. Banks are losing money in a short sale and aren’t too keen on it. It’s understandable. Imagine that you loaned a friend $100, and he came to you later saying he could only pay you back $75. Would you cave in easily? Probably not.
It’s important to know that a buyer and their agent have no control over the process. The success of a short sale — and how long a short sale takes — relies heavily on a listing agent. If the listing agent isn’t experienced with short sales, you’re likely wasting your time. A good short sale listing agent will properly advise the seller and have a thorough knowledge of the bank and its process before your offer is accepted.
Here’s a look at why short sales can take so long, along with tips for what you can do about it.
The seller’s bank must review the short sale package
In order to approve the sale, the lender requests a complete short sale “package” from the seller. Much like the package you must submit to get a loan, the seller must submit their finances. The lender will want to see the seller’s debts and assets, review their credit score and the contract to purchase the home. After all, why would a bank approve a short sale if the seller had $1 million sitting in the bank?
What you can do: A good listing agent will have the short sale package in hand and even completed upfront. Once an offer is accepted, the agent can simply add the contract and buyer’s information and submit it.
Documents get lost, pages go missing, signatures are left blank
Most banks require hundreds of pages in the short sale package, and many of those pages require signatures from buyers, sellers and agents. If one page is missing or one signature left blank, the document doesn’t get processed. Often, the listing agent will fax in 100 pages and just wait. Sometimes it will take a month to get a response from the bank, informing the agent that things are missing.
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.
Some documents quickly become outdated
It could be weeks between the time the documents get “processed” and when the information hits the desk of a negotiator, who actually reviews and negotiates. Does one bank statement come at the beginning of the month while all the others come at the end? That one bank statement may soon be outdated, and the bank will require an updated one. If that’s the case, it could take the lender weeks to realize this and another week to contact the seller or their agent.
What you can do: Review the statement date on each credit card and bank statement so you’ll know if a new one will arrive soon. If so, send it over right away.
The lender wants more information
The lender may ask to see the buyer’s proof of funds, review the preliminary title report or request more verification of the seller’s hardship (job loss, divorce, job transfer). The negotiator could request just about any additional information.
What you can do: The seller and agent should be ready to respond, because a delay could add a few more weeks to the process. Try to imagine yourself as the bank and think of everything that might be asked for. Provide as much information as you can upfront.
2 loans complicate everything
The short sale process is difficult enough with one bank. Imagine two banks, each with its own processes, that don’t cooperate? It could set everyone back months. The second lender may request more information before approval. Or, the second lender may issue an approval good for 30 days. If lender No. 1 approves on day 31, the seller must go back to the first lender to get re-approved.
What you can do: Understand the approval timelines for each bank and anticipate deadlines.
The deal could die at the last minute
Once the bank has a complete package and you get a negotiator on the phone, there is light at the end of the tunnel. After all this time, the negotiator may counter the buyer on price. Or they may only approve the sale if the seller contributes money. They could always ask for the commission to be lowered. No matter what they say, the bank’s request could kill a deal in the moment. And there’s no way to anticipate exactly what they will come back with.
What you can do: Don’t think the bank will simply approve a low offer. If the seller has money in the bank, they need to be prepared to contribute or you may have to come up with more money. Sometimes the bank is just looking at its bottom line and doesn’t care how everyone gets there. Buyers, sellers and agents must work together to make the deal work.
Foreclosure trumps everything
Time and again, all parties wait and wait and follow along the process — only to see the sale denied. What’s worse is that sometimes the foreclosure department at the same bank does not work in conjunction with the short sale department. A good offer for a short sale may be on the table, but the seller may be six months behind on payments, causing the foreclosure process to kick in. And the foreclosure process can trump everything. When this happens, the buyer no longer has a deal on the table because the seller, forced into foreclosure, is no longer the seller. In a foreclosure, the home belongs to the bank.
How to speed up a short sale
The best way to expedite a short sale approval, and therefore your escrow, is to be certain the seller’s real estate agent is experienced with short sales. The seller’s agent interfaces with the bank 24/7. If the agent isn’t experienced in short sales, chances are this process will drag on and on.
An experienced short sale agent will know how certain banks work, what to anticipate and how to best work through the bureaucratic process. But even the most experienced short sale agent can come up against brick walls or challenges they just can’t overcome. If you see a short sale home you love but don’t have much confidence in the listing agent, try not to fall too deeply in love with it. You’ll only be disappointed if the sale doesn’t go through.
- Insider’s Guide to Success With Short Sales
- Boomerang Borrowers: Buying Again After Short Sale or Foreclosure
- 3 Steps to Get Back in the Game After Foreclosure
Brendon DeSimone is a Realtor & HGTV real estate expert. He has collaborated on multiple real estate books and his expert advice is regularly sought out by print, online and television media outlets like FOX News, CNBC and Forbes. An avid investor, Brendon owns real estate around the US and abroad and is licensed to sell in two states. You can find Brendon online or follow him on Facebook or Twitter.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.
The explosion of digital and social media has opened up exciting new avenues for marketers and advertisers. Never before have there been so many ways a business can get their message out to their target market. Some are new tactics while others are new takes on older methods. Here are some of the exciting new marketing strategies for 2013.
The term “content marketing” only came on the scene recently. Also known as “inbound marketing,” content marketing is the use of articles, blogging, podcasts, videos and other content to answer prospect questions and help generate sales. The goal of content marketing is to create trust, answer objections and illustrate ways clients can use products.
One good example of this from Coca Cola. They have decided to transition their tradition of “Creative Excellence” to the much different platform of “Content Excellence.” That means they want to create content so valuable and interesting it is shared and talked about. The 30-second TV commercial is no longer the best way to get close to consumers. Coke is moving to a collaborative strategy that involves their audience much more than before.
Public relations used to concern itself with sending press releases and trying to get clients in the media. Now that many people get their news and information in social media, public relations has taken on more of a marketing role.
PR departments are working closer with marketing professionals than ever before. Public relations consultants are using their ability to tell stories to help create new narratives for marketing.
One of the fastest ways to create a marketing impact is to allow users to generate content. It gives consumers a chance to interact with their favorite brands, and marketers are able to rapidly create lots of content that will improve their presence in search engine rankings.
User generated content can be as simple as encouraging fans to make YouTube videos. Other popular methods are setting up online communities and asking users to contribute articles and blog posts.
Mobile marketing has been on the brink of exploding into the big time for several years. While mobile usage has clearly made huge gains, marketers were never sure the best way to take advantage of the trend; recently they have made great strides in creating content exclusively for mobile.
For example, many businesses have created their own applications that help consumers get information they need. Whether for iPhone, Android or other mobile platforms, there will be more use of “apps” to exploit the power of mobile marketing.
Promotional products have been a cornerstone of marketing for decades. One might think this marketing method does not mix with new channels like social media. Interestingly, promotional products fit well into new marketing strategies. Since social media is entirely digital, promotional products give marketers the opportunity to make their message more real.
Promotional products are largely used in person and must be touched and handled physically. They are perfect for creating a three-dimensional aspect to a brand message. Promotional products move a brand from the digital realm into the real world.
There has never been a more exciting time in the history of marketing. Changing technology has allowed consumers to play a much bigger role in the conversation around their favourite brands. In the past, marketing was ‘one-way’ with advertisers blasting their message to the world. Marketing has become more dynamic with multiple voices influencing the direction of the brand and its role in the marketplace. Content marketing, mobile marketing, public relations, user-generated content and promotional products are leading these changes for 2013.
This article originally appeared on Bluewire Media Web Strategy Blog and has been republished with permission.