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We get this question all the time!  Sellers want to sell their home quickly so that they don't do any further damage to their credit report. Buyers want to know, simply, if they can buy the home or if they have to look elsewhere. Buyer agents (Realtors representing their buyers) need to understand where in the process they are so that they can counsel their buyer.

Remember, when dealing with lenders, there is red tape, red tape, red tape. A Buyer and their Realtor are dealing with a person sitting behind a desk in some far-away land who has no real interest in the home that is being sold.  All they know is that they are to submit specific information to their boss.  Furthermore, they are being paid an hourly wage and sometimes a small bonus to do so.  They simply don't care for expediency.  Especially since our economy and housing sector has taken a turn for the worse, the amount of paperwork that is sitting on these desks is mounting and mounting and mounting. Many times, the initial paperwork that is submitted gets lost in a pile, never to be uncovered again.  So, after weeks of waiting, the process begins again.

In addition, most often, lenders will not do ANYTHING until the complete short sale package (along with all offers and addenda) are received.  Then, they perform their due dilligence to make sure a short sale is warranted.

Moreover, some 'lenders' are simply servicers of loans and thus they have no real authority to accept a short sale amount.  So, just when you think you won the process (because they escalate your offer to the next level), it gets struck down by yet another figurehead. What's more is that your offer can be approved by the servicer, but denied by any private mortgage insurer or guarantor who has the last say.

Another reason that the process takes so long is that there is a plethora of materials and documentation to gather, before and during the short sale process.  Some of these items include:

• A signed copy of the listing agreement with your Realtor.
• A signed copy of a sales contract with all addenda and attachments.
• A commitment letter from your Buyer.
• A written hardship letter stating the circumstances for your missed payments and default. 
• Your last two bank statements (checking and savings)
• Your last two paycheck stubs
• A HUD-1 settlement statement (net sheet) indicating the allocation of all sale proceeds.
• Your two most recent state and federal tax returns
• Your most recent summary satements for any 401k, retirement or investment accounts

Once all these items are assembled, your Realtor or agent will then submit them to the lender for review. It is at this point that the waiting begins.  The lender must then perform their own due dilligence, some of which may include:

• Re-assembling the materials the seller just submitted.
• Sending them down the line to the department head for further review.
• Sending them once more to yet another department head.
• Submitting them to their board.
• More red tape.
• Performing a BPO (Broker Price Opinion) to determine the fair market value of the home.
• Losing all the documents your Realtor submitted.
• Reassembling them again.
• More red tape.

If everything goes well, the lender may approve your short sale and the seller will be free to complete the sale of the home to a Buyer at a lesser amount than what is owed. It is never this simple, though.  Remember, we are dealing with a person sitting behind a desk in a city far removed from yours.  This person has very little empthay for your situation, and they certainly do not understand your market. Many times, the short sale process is more painful than a thousand papercuts on your tongue. Seriously!  Other times, it can go so smoothly that you wonder what is around the corner, and what have you missed.

Please be patient! We have seen short sales completed within a couple weeks, and we have seen them take as long as 180 days before the lender calls to accept, counter or reject the offer.

Now that all of this has been said, remember again that we are talking about the traditional method of doing short sales.  There are some new advances in the short sale process which is available to some sellers and some lenders.  The US Treasury's new Home Affordable Foreclosure Alternative Program (HAFA) is being extended in order to speed up and standardize the entire short sale process.  Be cautious though... this program is only available to those who qualify under the HAMP program.  Please read on...

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