When a home has two loans, the 2nd lien holder must agree to take a loss, and accept what the first lien has to offer, if they can't come to terms, and the 2nd won't release lien, the home will likely end up foreclosing. Example: If a seller owes $160,000 on the first and $40,000 on the second, offering $160,000 for the property leaves nothing for the second lien holder. The first will need to give something to the second to gain its cooperation and release of lien. In my experience, the 1st lien holder usually offers the 2nd lien holder $3,000 to release lien.
How long do short sales take? This can vary depending on the lien holder, and the listing agents follow through. The listing agent needs to contact the lien holder on a regular basis, to be certain that the file is being reviewed. I call every week, and even more then once a week on some files, however, the short sale process, from submission to short sale approval, is generally as follows:
Submission of offer and complete short sale package from the seller.
Bank acknowledges receipt -- 10 to 30 days.
Bank orders a BPO or appraisal -- 30 to 60 days.
File is reviewed -- 30 to 60 days.
Negotiator is assigned -- 30 to 60 days.
Level II negotiator may be assigned -- 30 to 90 days.
File is approved, countered, or rejected -- 60 to 120 days.
If you're wait time is greater then 120 days, it's possible that the listing agent or a third-party negotiator is not on the ball and is lax about calling the bank. Calling the bank means waiting on hold anywhere from 10 minutes to an hour or longer.
Or, a lengthy short sale period can also mean the bank has internal problems, not enough staff or has lost the file a few times, prompting the listing agent to resend the package over and over.
Unfortunately, you can't always avoid problems on a short sale. Patience is key.
Hire an Agent with Short Sale Experience. It's one strike against you if the listing agent has never handled a short sale, but it's even worse if your own agent has no experience in that arena. You need an experienced short sale agent.
An agent with experience in short sales will help to expedite your transaction and protect your interests. You don't want to miss any important detail due to inexperience or find out your transaction is not going to close on time because no one has followed up in a timely manner.
If you have additional concerns, or questions regarding Short sales, or would like to schedule a confidential appointment to discuss short sales, please contact me. Anyone can call themselves a short sale expert, however its the experience in short sales that really matters.
Buyers pursue short sales to get a good deal. So when you see a price listed for a home that you think is too low for the neighborhood, before you get excited, ask your Realtor to call the listing agent to find out if the home is a short sale. As a Realtor I typically ask if there is one lien holder, or two lien holders, and who the lien holders are. Some lien holders seem to take longer then others.