The Lawhead Team would like to share some helpful time frame tips for buying a short sale property.
Just like a regular real estate transaction, if you want to purchase a home that is being sold as a short sale, your first step is to write an offer and submit it to the seller.
First, your short sale offer has to be approved by the seller. If the seller agrees to the terms of your offer, they will then submit it to the bank for approval. Next is the approval process from the bank.
Since getting an offer approved for a short sale is a process that requires a third party approval, it is going to take longer than a normal real estate transaction.
How long will it take for the lender to approve your offer? This really depends on a lot of factors. Number one is who is the servicer? For example, Bank of America is one lender that takes the longest, and it can take sometimes up to 4 months to get an approval. Wells Fargo on the other hand is a lot more organized and usually can get an approval within 30-45 days after submitting the offer.
The time frame also depends on if the bank has already approved a price. If the bank has already approved a price point, then you know where to write your offer and you can skip the counter offer process. If they haven’t approved a price they will usually order an appraisal or a BPO (broker price opinion) to be done on the property which takes more time.
How much time from start to finish should I expect when buying a short sale? Average is usually 3-4 months depending on your qualifications as a buyer. If you have cash, once the approval from the bank is completed, you can close in a couple of weeks. If you have to get financing, depending on the type of financing you’re getting, the time frame from bank approval will be an extra 30-60 days.
Will I still have time to do my due-diligence timeline and financing? Once you have approval from the bank, they usually give you a certain amount of time to do your due-diligence. You get plenty of time to do your inspections to determine if you still want to buy the home. If your inspection shows there are problems with the home you might just have to walk away. Most short sales are sold as-is. If the problems are bad enough sometimes you can re-negotiate with the bank. They may reduce the price in order to compensate for repairs.
The bank will give you time to get your financing completed, but if you go over your deadline, you can still ask the bank for an extension. Most the time financing deadlines can be extended if you run into any problems, just talk to the listing agent and ask for an extension.
During the short sale approval process, many buyers get anxious and decide to pull out. Sometimes you just find a better home and decide you want to write an offer on that home. Other times a buyer will have no other reason than cold feet.
There are many reasons to withdraw from a short sale offer and you have the option to walk away at anytime up until the bank accepts your offer. To withdraw, just contact your agent, and tell them you want to withdraw. It’s that simple. They will notify the selling agent that your offer is no longer on the table and that’s it.
The only consequence you face with withdrawing is lost time. When you submit an offer on a short sale, you can ask your agent to put in the contract you will submit earnest money at the time the bank approves your offer. Once you submit your earnest money, you still have your financing and due-diligence deadlines to withdraw before you lose your earnest money deposit.
Once your due-diligence and financing deadlines are over, that’s when you can lose your earnest money deposit. If you withdraw after those time periods, you automatically forfeit your earnest money. It’s up to you to decide if it’s worth it to lose your earnest money. If you really don’t want to buy the home, losing a $1000 in earnest money might be better then living in a home you hate.
Remember, should you have any other questions regarding short sales, be sure to ask The Lawhead Team. We are always available to help out and if we don’t have the answer for you, we will find someone that does!
