Short Sales

How Long Does Short Sale Approval Take?

Ahhhh… the million dollar question.  It will cost us a million dollars to come close to a precise answer and I could make a million dollars by selling the secret to forcing banks to approve short sales in a timely manner.   But let’s see if I can give you a bit of an answer for this question that is burning in everyone’s mind.  (And causing heart burn, I might add).

So, how long does it take for a bank to approve a short sale?  The first key to answering this question is to find out how many liens are on the property and what type of liens they are.  If there is one mortgage lien on the property, the timeline will be shorter.  If there are 2 mortgage liens on the property, add an additional 1-2 months for the banks to squabble over the money.  If there are 2 mortgage liens and a home equity line, this spells trouble and time.  I’m not saying that short sales that have more than 2 liens on them are impossible.  I’m just saying that they are more complicated and take more time.  I know several REALTORS(R) who have successfully negotiated short sales with 3-5 liens.  It will all depend on the type of lien and who holds the liens.

Which brings us to the next piece of solving this mystery.  The bank that holds the liens on the short sale property will be setting the timeline for approval.  Some banks take longer than others.  Some banks need an act of Congress to make a decision.  No seriously, an act of Congress.  Some are so easy to work with and are so fast you feel like you may be missing something.  The banks that are notorious for taking the longest are:  Wells Fargo, any lien formerly held by Wachovia (now Wells Fargo), Bank of America, and any lien formerly held by Countrywide (now Bank of America).  Banks that take a pretty long time, but eventually get you an answer once you get through the initial short sale approval period are Chase, Aurora, BB&T (BB&T is getting worse at approving short sales), GMAC, and SunTrust.  The quickest short sale approvals come from the small local banks and VHDA.  If Fannie Mae is involved in the short sale approval process then you can tack on a few more weeks to the timeline.  Here’s a key to the timeline, the bigger the bank – the longer it takes. 

So, we’re back to  the original question.  How long does it take to get short sale approval?  The easy answer is – prepare for 3-8 months of waiting for approval followed by 1 month of scrambling to get everything done to get to the closing table.  I know!  That’s a crazy amount of time to wait to close on a house!  If you like the house enough, it’s worth the wait.  Patience is a virtue… not one of my virtues, but a virtue, none the less.

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3 Responses to “How Long Does Short Sale Approval Take?”

  1. On January 8, 2010 at 12:56 pm ShortSaleArtisan responded with... #

    Interestingly enough, while that is what I hear from everyone and seems to be the norm, I did talk to a guy today who was telling me that he turns around his short sales on average in 35 days, and does a significant volume – which made me wonder how volume influences speed of processing?

    Hopefully the banks will dig themselves out of the holes they are in and staff their departments appropriately in the beginning of this year. I’ve seen some encouraging evidence but most investors and agents I speak with are all pessimists, haha.

  2. On January 8, 2010 at 8:13 pm Sarah Stelmok responded with... #

    Short Sale Artisan – I have also heard of some agents being able to get approvals in short amounts of time. Quite honestly, different regions have different short sale policies. I can only speak to my area. However, I do know that if you go to Blacksburg, Virginia, the banks handle this type of transaction differently. I think it has to do with rate of delinquency and market conditions. I also know of plenty of agents who have lost their licenses by falsifying paperwork in order to get the short sale approval process started early. This would involve straw contracts. This is illegal and will eventually catch up with any agent who is practicing this way. My partner and I have gotten ahort sale approvals in as little as 15 days and as many as 11 months. I would love to see banks staff their loss mitigation departments with well-trained representatives. Unfortunately, I’m not seeing that to date.

  3. On June 15, 2010 at 11:57 am Vain responded with... #

    I have my own theory. Aside from the banks being slow, they might try to extend the wait time. As a home buyer, we’d tend to prey on homes with large DOM (Days On Market). So why shouldn’t the lenders prey on buyers that have been waiting for a long time?

    They make you wait 3-5 months for a response, just to ask you for more money. Since you’ve been waiting for so long, what’s another $30k? You’d probably want to pay it in hopes the process will go by faster.

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