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.
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