Short Sale: The Longest Real Estate Transaction

There is not much “short” about the amount of time it takes for a Short Sale to be completed—the longest short sale is rumored at three-and-a-half years! You are asking the bank to take less than what is owed…which means you are asking for a lot.

A short sale is often the best thing for the universe—the bank, the homeowner, and the neighborhood. The bank gets the most money for the property at the time…as opposed to a foreclosure or REO (Real Estate Owned). The homeowner gets out from underneath an upside down situation. The neighborhood maintains property value by putting another homeowner in the house instead of leaving it vacant.

Though a short sale is often best for the universe, some lenders like to take the long way home. A short sale is a business transaction, even if it occurs on the emotional level where you live. While you may be better off and your neighbors may be better off if you short sell your house, your lender might not be.

Banks do not want your house. They cannot set up a branch office on every corner and along every street in between. Your garage would make a lousy drive-through and your oven is a terrible vault (no matter how much you do not use it). Banks are not in the real estate business; they are there for the money. A house is only a collateral prize they might accept if mortgage payments dry up. However, banks may have money motivations not to accept a short sale.

That is partly what takes so long in a short sale. It is not just lining up the buyer, it is getting the bank to do the math to see if the deal is right for them. They have to find the balance of the current value, how much they are losing, how much insurance they would make if the house goes to foreclosure, cost of “maintenance” on the property, and their liability in owning the property. The aftermath may not equate in the homeowner’s favor.

Short sales are not known for being “short” in duration. Furthermore, while the lending department is negotiating, their legal department is proceeding. Sometimes a foreclosure defense is useful to address the legal aspect, and thereby allow time for the short sale to go through.

A short sale takes patience, but often pays off in the long run of credit.

Source: http://staugustine.com/interact/blog-post/rusty-collins/2012-10-09/short-sale-longest-real-estate-transaction#.UHQfVC5lCZY