The Short Sale Process
From the beginning of a short sale to the end, we follow a process that is broken down into 7 stages or “status assignments” within our system. The information on this page is designed to give you a very general idea what to expect in the coming transaction, as it relates to the time you spend in each of the 7 stages below.
Please keep in mind that the time frame for each Stage will vary greatly depending on the type of short sale and the bank/investor that we’re working with.
Estimated Time Frame: Varies based on homeowner and listing agent
This stage represents the very beginning of the short sale process, usually before the property is listed in the MLS. Transactions which are in this stage do NOT have all the required documents for complete short sale processing. We may be missing financial documents, listing agreements with the brokerage, engagement agreements, and/or other miscellaneous requirements depending on the specific transaction.
Estimated Time Frame: 5-10 business days after all documents are received
After all initial documentation has been received from the homeowner; we submit the “Third Party Authorization to Communicate” to each of the applicable lienholders. Once they approve the document, we confirm important information such as loan payoff(s), delinquency status, foreclosure status and/or dates, HOA amounts due and taxes owed. We also perform a full title search to determine the existence of other mortgages and/or judgments which may not have been known about previously.
The Transaction Setup stage is also where we determine the homeowner’s eligibility for special short sale programs available through FHA, HAFA, Bank of America or Chase. If eligible, we will submit a request to initiate a short sale with or without an offer. Once the request is submitted or, if not eligible, the short sale transaction status is advanced to the next stage.
Estimated Time Frame: Varies based on time of offer submission
The maintenance stage is when we are essentially waiting on the listing agent to procure a viable offer for the property. During this time, we’ll follow up on the file approximately every 3 weeks unless something extra is required. During our scheduled follow ups, we’ll be checking on the status of each mortgage account and any foreclosure actions which are being taken by the bank. If something changes, we’ll make sure that everyone knows about it. For HAFA short sales, we also convey the marketing data from the listing agent, to the bank.
Estimated Time Frame: 21 to 45 days
Once we receive an executed contract with all required addenda and documentation, it is submitted to the applicable lien holders immediately.
Many actions can take place during Stage 4, depending on the bank, investor and type of short sale. For most short sales, this is the time when the bank is doing a final review of the homeowner’s qualifications for a short sale, determining that all required documents have been submitted, and performing property valuations. Once these tasks have been completed and the file has been assigned to a negotiator, we advance to stage 3.
Important Note: If we have had offers in the past or if this is a pre-approved FHA or HAFA short sale, some or many of the activities in this stage may have been completed in advance. Because of this difference, Stage 4 may last as little as 7-14 days while future stages (3 & 2) may take a little longer.
Estimated Time Frame: 10 to 14 days
After the mortgage bank has assigned a negotiator to the file and the valuation has been completed for the property, the status changes to “Negotiator Review”
This is the time where the negotiator reviews the entire file and looks for missing documents or problems with the transaction. She will also review the valuation (BPO or Appraisal) and determine the minimum sales price that the bank/investor can accept. If the buyer’s offer meets that minimum price, it will be accepted. If it does not, it may be rejected or she may issue a counter-offer. If the buyer, seller and the bank can agree, the negotiator will submit the file to the investor or a supervisor for final approval. Once this submission has been confirmed, we advance to Stage 2.
Estimated Time Frame: 10 to 21+ days
The transaction is advanced to this stage once we’ve confirmed that the short sale file has been submitted to the Investor (or the negotiator’s supervisor) for final approval. This final review stage can sometimes include several additional reviews from 3rd parties or Quality Control audits by internal processors within the bank. The time this takes depends on how many 3rd parties that we have to wait on and who they are. Transactions involving private mortgage insurance companies or government agencies like Freddie Mac will always take the longest.
Depending on the specific transaction, Stage 2 can mean that we now have verbal approval. Watch our regular updates to know for sure. If we do have verbal approval, waiting through this Investor review can be the most frustrating time during a short sale. Just keep in mind that transactions that reach this point with verbal approval will eventually get written approval more than 95% of the time – unless the bank has already indicated that the offer is too low.
If the bank has argued the offer amount then Investor Review can take a LOT longer than 21 days. You see, from their perspective, the short sale is technically finished/verbally approved. They simply approved it at an amount higher than the current offer. Obviously, that’s not a good thing for anyone so, if we feel like their approved amount is wrong then we can dispute the bank’s assumed value of the property and still get an approval.
So, when a value dispute is required, that requirement can easily double the maximum waiting period during this stage. Whether we have verbal approval or we’re disputing values, the Investor Review stage is the time when patience matters the most! No matter what, if getting an approval is possible then, we will get it for you eventually.
Estimated Time Frame: 30 days following buyer’s receipt of written short sale approval
The file advances to this stage one we have received a written approval letter that is without errors and is acceptable to the homeowner. At this point, the short sale is 100% approved, in writing, and the bank has set a definitive time frame for closing, usually within 30 days from the date of written approval.
Once the file moves to Closing Coordination, the buyer must be ready to move very quickly. We understand that it’s not always easy to close a loan in 30 days. Unfortunately, many short sale banks just don’t care. If we don’t close by the deadline on the approval letter, an extension will be required. Extensions are never guaranteed, more money is sometimes required and obtaining them can take a very long time. Make sure that your lender understands the sense of urgency required during this stage. Sometimes, closing on time is absolutely required.