Short Sales are Often Long and Frustrating

Short Sales are Often Long and Frustrating

A short sale can be a great way to get out of your mortgage before you decide to simply walk away. But do you have the patience to wait for the process to go through?

With many homeowners owing more on their home than what it is worth, short sales are becoming very common. A short sale occurs when a homeowner essentially makes an agreement with their lender to sell the home for a reduced price in exchange for the lender forgiving the remaining balance on the loan. However, the homeowner must prove financial hardship in order for the lender to even consider doing a short sale on their home.

While this type of financial help has helped thousands of distressed homeowners get out from under a home loan that is causing stress, financial difficulties and other frustrations, doing a short sale is not an easy process. In fact, with the inventory of homes that are on the block for foreclosures or short sales, it can take as long as six months for a short sale to even get processed.

A longer process is most common if your home has a second mortgage or mortgage insurance, according to Ellen Mahoney, the president of Complete Title Services’ loss mitigation department in Michigan. The reason these types of short sales take longer is because many times the mortgage loan is sold to another lender or investor in the years following the purchase of the home. These lenders or investors then purchase insurance on the real estate to help minimize their risk and protect their investment. In most cases, neither the homeowner nor the bank that originated the mortgage is aware of this extra insurance policy.  According to Mahoney, these transactions through which the mortgage was sold create a major disruption to the short sale process due to additional paperwork and research.

Often these complexities and associated disruptions and length cause homeowners to tired of waiting for the process to go through; they end up just walking away from their mortgage.

But sellers are not the only ones who get frustrated by the length of time and complexities for a short sale to go through.  Third party buyers get turned off as well.  Brian Pannebecker of Michigan made an offer on a home going through a short sale in Michigan only to have the bank reject the offer. This made him rethink his idea of buying a short sale home and he bought a foreclosure in Florida instead. He says the entire process from the time he made his offer until the closing process was completed was only about six weeks.

Banks are, however, trying to streamline the process so it goes much faster for homeowners who want to get out from underneath their mortgage. Chase, for example, is now averaging 5,000 short sales each month. According to spokesperson Mary Kay, the average short sale through Chase takes an average of 30 days for approval. Other banks are trying to do the same thing and the federal government has instituted a program – the Home Affordable Foreclosure Alternatives Program – to help streamline the process to help the maximum number of troubled homeowners.

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Reviews

  • Peter

    July 28, 2011

    Short sales are agreeably a long and frustrating process. However, the benefits of closing one is considerable for all parties. The question is, how do you successfully close a short sale? You need an expert negotiator with a lot of experience and top notch organization skills. These negotiators will manage the transaction by working with the lender(s), Realtor(s), buyer, and seller. It is crucial for a negotiator for every short sale transaction.
    A great article on this is here: http://seattleshortsaleblog.com/2010/04/12/how-to-find-the-best-short-sale-agent-in-your-area/

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