11 Reason’s Short Sales Take FOREVER

by July 1, 2009 • 15 comments

One of my friends had a customer that is demanding for the bank to hurry up and get the short sale done, they are tired of waiting. I bet I am hearing some hearty “Amens” from all my Realtor buddies. And also as life would have it I called my short sale departments to see how my little short sales are coming along so I can report back to my apprehensive buyers. As in most things in life there is a flow to it, a cycle that all things go through to reach their peak or completion. So it is with a “short sale”. Please know that this is straight from a company that I am working with and I am NOT going to name any names. I have had a couple of easy ones but generally it has been taking from 3 to 6 months to get an approval to move to close.

  1. Seller decides he can no longer make payments so he list property with you and gives you an approval letter to speak to his lender. He gathers all of his financials, his budget, his taxes, his last 4 months of bank statements, and his hardship letter. You send all of this in to the bank and you wait and you wait and you wait.
    NOTE: it will many times take days before your authorization letter gets to where it needs to be. (this is the easy part)
  2. You are enthusiastic and excited because you get a buyer and grateful that buyer and seller have agreed to the short sale price and you have signed all the forms and additional short sale addendums. You and the other agent try your best to brace the buyer and the seller for the long months ahead.
  3. Offer along with HUD-1 and any other updated documents that the lender needs are sent in and the fun begins. I have a great title company that helps me gather this information. (McNeese)
  4. (Real life example) Contract goes into the company on April 7, 2009, you call each week and the lending company tells you that they are about 4 weeks behind on uploading documents to the system. You continue to call each week and they can’t find it and suggest you send it in again. You get excited because a BPO (Broker Property Opinion) is ordered somewhere along the way.
  5. Now to make it real fun I forgot to tell you that there may be 2 mortgage companies to deal with so we do this times 2!!!! The first mortgage company now tells you that they are close to getting their deal approved and they ask for explanations of customers finances and additional documents that you send in with a gleeful heart. They also inform you that while they are maybe only a month away from completion and it is now June 25 they let you know, oh by the way. . . we want you to call the other mortgage company and tell them that although they are owed over $200,000 on the second note that they will be glad to give them $3,000 of the dollars upon close. The first mortgage holder wants the Realtor to get something in writing from the second mortgage holder. . . now it gets real fun.
  6. (Real life example) Keep in mind that although the buyer knows they need to be patient, it is hard for them and they wonder what in the world is anyone doing. . . is anyone doing ANYTHING? ???? On June 25th second mortgage company informs you that the contract that you sent in on April 7 was opened and reviewed for real on June 15th and by June 24th it was finally in the hands of the FIRST PHASE negotiator. Keep in mind that although first mortgage is almost finished we have to wait on the second. Meantime fees are mounting if the buyer is behind on payments and they usually are.
  7. The first phase negotiator will keep it approximately 15 days to make sure all documents are there that are needed and of course it has been awhile so they need to be updated so you gather the needed paper work and send it in again.
  8. IF all is well the file now goes to the SECOND PHASE negotiator who has 30 days to review. If he finds all things well, the file now travels to the investor.
  9. IF all is well now the investor has from 2 to 30 days to review the file..
  10. Shortly before close they let the seller in on what they are willing to do for them in the way of accepting a lesser amount owed and what the seller contribution needs to be and if all is agreed upon then we all move to close. Oh and one more thing the lender expects the Realtors to take a reduced commission and they do and they all live happily ever after.
  11. If the lender and the seller do not agree and if the buyer gets tired of waiting then it is back to the beginning of the short sale life cycle.

This sale portrayed in my “real life example” is projected to have an answer according to the second mortgage company around September if all goes well. So thus the life cycle if all survive it will be approximately 6 months!!! My purpose in sharing is not to discourage but more to bring attention to the fact that a short sale is anything but short and the more inventory that is sold this way the more difficult it will become. There are no short cuts (no pun intended at all) so just take a deep breath and be very kind to anyone involved in this adventure. I am actually enjoying all that I am learning from this and if patience is not your virtue it will become so. I left out some of the duties that a Realtor will do along the way because my main focus was to let the consumer know why it takes so long so that you can just sit back and enjoy your life while the lenders, Realtors and title companies are working the deal.

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1 James July 1, 2009 at 9:21 pm

Thanks for hanging in there and trying to get the deal closed. If it’s a condo, the associations sure need all of the help they can get from hard-working realtors to help get the unit under new ownership…New Owner that pays assessments. At least this seller is making an attempt to sell the property. Many owners that are not paying assessments and are also in default on their loans, are making no effort to sell their unit, collecting rental income, and probably coming down to the beach and enjoying resort amenities as they please. The banks are not following through with foreclosure and the associations are getting nothing, until the 4th quarter of the year when they have to “hit up” the paying owners with additional assessments. You and Jason do a great job with the Beach TV Show, which is a great way to expose great deals on properties, many of which are currently short sales and foreclosures. I wish there was something that could be done through the media to get banks to quit sitting on their hands and allowing “dead beat” customers to “squat on associations”.


2 Gregg July 2, 2009 at 6:27 am

What course of action is available to the HOA’s to deal with these “dead beats”? The ones that collect rent etc. but don’t pay their fees?


3 Terry July 2, 2009 at 11:12 am

Karen, based on your story and as someone not well versed in how all this works it seems to me that it would better for all concerned to let most of these short sales go into foreclosure.


4 James July 3, 2009 at 6:43 pm

Not enough. You can’t cut off their utilities, or prevent them from renting or using the condo or amenities. You place a lien on the unit, then a “notice of lis pendens”, then a “summary judgment” and finally take title (temporarily) to the unit. The association can then rent the unit to try to recoup the lost fee revenue. Each step cost money, which is added to the owner’s account; however, you’re very unlikely to collect any of this because the bank is going to eventually wake up and foreclose and take title back. The Association will then only get 6 months of back assessments and none of the legal costs. I’m new at looking into all of this, but I really don’t believe that there is a good course of action. The best case scenario is for the banks to act quickly, complete the foreclosure process, and list the property at today’s market value (which means they take a big hit on the loan) with a local realtor in the Bay Co. MLS and get a new owner for the property.


5 karen smith July 3, 2009 at 8:57 pm

Hey all I am loving all this back and forth feedback and always enjoy it because I am constantly learning. To add to the short sale saga.. I called the company that I talked about in the article and they informed me yesterday that they rejected the short sale from almost 4 months ago. I called again today and spoke to someone else and they said NO that they were still looking at it. I liked the second answer better so I am hopeful.

My latest tip is… Always call them EVERY week and sometimes recall to make sure the answer you received was the right one. Again this is not intended to shed a negative light on those companies because they are doing the best they can with what they have. So I say lets just keep on finding the bright spot and keep on keeping on. Keep on commenting and blessing this page!!!!


6 Gregg July 3, 2009 at 9:03 pm

There ought to be something the HOA can do other than sit back and let it happen. In our particular case all the utilities are included in our quarterly fees, I would think the HOA could get everything shut off due to non-payment.


7 karen smith July 3, 2009 at 9:51 pm

Believe it or not a short sale as difficult as they can be are still always a better option than foreclosure for all parties. A foreclosure is a greater cost to every one.
I addressed these issues in an article several weeks ago and for the seller it is not quite as bad on their credit and many times a foreclosure will end up in a huge judgement against the seller. Not to mention that a bank will get more money for the property in a short sale as compared to a foreclosure.

It is a challenging and different time for all of us. We are all learning as we go. The funny thing about it is that I very boldly sat at a conference table a couple of years ago and said, “I know one thing I am sure not going to mess with any short sales!!!!” Needless to say they are a huge part of my file cabinet at this time.


8 Terry July 4, 2009 at 12:40 pm

Thanks for your reply Karen.

Okay the seller and the bank seem to have a vested interest in the short-sale option, but what about the buyer?

It seems to me they simply want what they feel is a good deal and this process could easily be a fruitless exercise, as I doubt they could put offers on any other property while this exercise runs it’s course.


9 James July 4, 2009 at 4:57 pm


It is currently against Florida Law for an association to cut off an owner’s utilities.

Karen is correct in stating that the a short sale is a better option for all parties. Unfortunately, there are many cases where the owner is not attempting to work with the bank to try to sell the property for less than what he owes. Instead, they’re just sitting back collecting rent, paying nothing to the association, or bank, don’t even have their property listed for sale, and just waiting to see how long it takes for the bank to take action. There was an article about this on TV recently. These types of owners are referred to as “squatters”. There may be courses of action that I am not aware of to deal with these folks.


10 karen smith July 7, 2009 at 6:35 am

Hey Yall
I have been out and about showing property so not much time at the computer sounding board. I think Terry said something as to what is in it for buyers??? I guess the main thing is you can get a good deal IF you are willing to wait it out and I do encourage my buyers to have a plan B and at the very least I am always scouting for them. I know I may be yelled at for this one but I am getting a little dismayed and when I can I encourage my buyers to find something that is NOT a short sale. Frankly you can get a great deal in today’s market short sale or NOT. They do have their place and that is why I have spent so much time writing about it lately because I do think it is always a better option than foreclosure. I know that I was once a part of a community that was struggling because of all the people not paying their association fees but now that has gotten much better because people are buying all of the properties now. It really is such an EXCITING time to be a buyer and a REALTOR if you enjoy the challenge and adventure and I do.. off and running.. great day to all you deep thinkers. I love all your comments, if fires me up.


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14 AGEN DEWA POKER January 15, 2016 at 11:02 pm

Good article. I’m facing some of these issues as well..