Buying a Home in a Short Sale: How to Speed It Up - Quicken Loans Zing BlogBuying a home in a short sale is a popular choice with some because you can get a really good deal on a property. But, there can be some hidden pitfalls if you’re not familiar with the process. A short sale isn’t usually short; it can take a lot longer than a normal home sale because a short sale involves a lot more legal factors and bank approvals than a regular sale.

The good news is there are some new lender policy changes that can really save you time on the process.

What Is a Short Sale?

A short sale gets its name, not from being quick, but from the fact that the home is sold for less than (short of) what’s owed on the home, and the seller isn’t able to make up the difference at closing. This happens for several reasons, but usually it’s because the house was appraised at a lower value than what’s owed on the home.

The homeowner often seeks a short sale agreement with the bank that holds the mortgage in order to avoid foreclosure. Because the bank will lose money in a short sale, there’s a lot of haggling to deal with.

Because things aren’t already complicated enough, sometimes homes in short sale will have two mortgages on them. So, you’ll have to deal with two lenders who are trying to lose as little money as possible.

Two major factors in how efficiently a short sale is completed are the bank owning the loan and the listing agent. Because these transactions are so complicated, agents who don’t have much experience with them are likely going to have a difficult time navigating the process.

All of this isn’t to say that you shouldn’t purchase a home in short sale, but just be aware of what you’re getting into. If the listing agent is unfamiliar with the process, or the bank doesn’t want to make a deal, you’re in for a long ride.

The carrot on this stick is that you’re getting a home for significantly less than it’s worth. And, now, there’s a light at the end of the tunnel.

New Short Sale Process

Typically, if you’re trying to buy a home in a short sale, you have to sign the purchase agreement with the seller, wait for the bank holding the existing mortgage on the home to approve the purchase agreement, and then you have to go to your lender and start your mortgage process. Not only does this process take a long time, but when the bank finally approves a short sale, it usually only gives a couple weeks to close the loan. If you miss that deadline, you have to start all over again.

So, here’s the good news.

Recently, some lenders, including Quicken Loans, have adopted a new program where the buyer’s lender can begin underwriting the loan as soon as the buyer has a signed purchase agreement from the seller – before the bank gives its final approval.

Adam Speck, a regional VP of mortgage banking for Quicken Loans, explains why this is such a great benefit:

“As we’re calling top real estate agents across the country, we’re finding that this new program is very well received by the real estate community as a whole. This makes the entire process of a short sale much less stressful, especially once we get bank approval, often allowing very little time to close the loan.”

If you use a lender with this type of underwriting policy, you’ll still have to wait for the bank to approve the sale, but your lender will have a huge head start on their end of the process. This way, you’ll have a much better chance of meeting the bank’s deadline and acquiring your new home at a reduced price.

The long and short of it is that buying a home in a short sale can save you a lot of money if you know how the process works. Make sure the professionals you’re working with have a lot of experience, and use a lender who’s going to give you the smoothest process possible.

If you’re interested in more info on this or similar topics, let us know!

 

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This Post Has 20 Comments

  1. I have been in the process of buying a short sale, everything is done besides the bank approval… how long does it typically take for the bank to approve it has been three months with no short sale approval letter from bank.
    thank you

  2. Hello i am in the process of purchasing a new home, my old home was destroyed in a fire on june 29,2015. I settled with my mortgage company for 52,500 but i owed about 64,000. It was a mobile home that i added on to. The problem that i am having is on my credit report it says settled for less than full amount. But i have mortgage company sent me the title and everything. The problem i am having is the people i am trying to buy a home from considered it a short sale. But the papers and Deed i received from the mortgage company says paid in full.
    Thanks in advance
    Sylvester

    1. Hi Sylvester:

      My recommendation would be to file a dispute with each of the credit bureaus. You can do this online. Send copies of the documentation and deed you received from the mortgage company saying it was paid in full. Hope this helps!

      Thanks,
      Kevin Graham

  3. I am interested in finding out how long a short sale actually takes. Two-Three-Four months. I have to make a decision on purchasing a house and have a lease that will expire.

    1. Hi Angie:

      I don’t really know the answer to that question, but one of our Home Loan Experts may be able to offer more insight. I’m going to have one of them reach out.

      Thanks,
      Kevin Graham

    1. Good morning, Maira. It depends on the bank and their process approving the short sale. It can go on longer than the normal loan process. Best thing would be to talk to the bank that is short selling the property.

  4. Is there a way to find out the status for my particular case with quicken? Once approve, what is the time period Quicken gives?

  5. Hello this is Shital again.
    Do you have any timeline set? Meaning how long does it take to order BPO/ appraisal.. Once done how long time do you take for any decision?
    I would really appreciate if you can provide the steps involved in a short sale and timing associated with those steps.
    Thanks,

  6. My husband and I went into contract on a short sale on 11/23. We are still awaiting a final short sale approval from Quicken Loans. I’ve done everything this article has advised us to do. Why hasn’t Quicken Loans given the final approval so we can close on the house?

  7. I have the same question. I just put in a bid on a short sale. It was submitted to Quicken last week. Just curious how long I should plan on waiting.

    1. Hey Shital, great question. Short sale approval depends on a number of different things; I’ve forwarded your question to one of our Home Loan Experts who will be reaching out to you with all of the information you need. Thanks for visiting our blog!

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