Buying a short sale home generally takes longer than buying a traditional, non-distress sale. Buying a short sale is a two-part endeavor: you have to wait for the seller's lender to approve the sale and you need to get through the escrow period in which you and the seller complete your contract obligations. Together, these processes can span as little as two months or more than one year, depending on the lender and particulars of the short sale deal.
What's the Pace of a Short Sale Approval?
Convincing a mortgage lender to take a financial hit is no easy feat, as it requires substantial documentation and time. In a short sale, the seller must persuade the lender to take a loss by allowing the property to be sold for less than the amount due on the loan and releasing the mortgage lien. Some lenders process short sales more eagerly than others, thereby escalating the home sale process and timeline; however, other lenders, particularly those with a high volume of short sales, take longer. As a buyer, you generally have little influence on the lender's pace. It typically takes at least two months to get approval on a short sale with a single lender, and takes four months or more when a second mortgage lender is involved.
Understanding Escrow Time Frames
Much like a traditional escrow, the short sale escrow period lasts between 30 and 45 days. Because of the time-sensitive nature of escrow documents, escrow holders typically don't start the escrow process until the lender provides written approval of the short sale and sales contract. You obtain mortgage financing during the escrow period, a process that involves a home appraisal and a mortgage underwriting review. You also conduct property inspections and complete and review property disclosures. Buying with cash might shorten the escrow period.
Your Actions May Prolong the Short Sale Time
A seller's and buyer's response times can affect the short sale approval process and closing time line. Lenders typically set deadlines for documents needed from buyers and sellers, such as financial statements and disclosures. Short sale packages usually include hundreds of pages and lenders might give several days or require immediate response. In turn, lenders can take several days to several weeks to review documents. Signatures left blank, missing or incomplete paperwork and lost documents can further stall the short sale approval process.
What the Professionals Say
When you start the process of buying a short sale house, lenders, real estate agents and attorneys often will give you an estimated time frame for short sale processing, based on their experience. At the time of publication, the Ark Law group website stated that the process typically takes 90 days from listing to approval, plus an extra 30 days to close the sale. In general, time lines vary by market conditions, lender volume, transaction complexity and how quickly all participants work to gather required information.