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 34 Comments

  1. We put in an offer on a home September 2017. The seller accepted 2 weeks later. We got it appraised October 2017. The home appraised for $20,000 less than the asking price. We found out she owed more on the house than what it was worth so the seller had to apply for a short sale. It’s going on 8 months since the offer and 7 months since the appraisal and we still don’t have an answer yet. So I want to know, will we have to get another appraisal and if so do we have to pay for it or can we get it at a discount? BTW, we were going through Quicken Loans and everything was going great on the lending and until we hit this roadblock.

    1. Hi Yolanda:

      Short sales are complicated, but I’m going to get this to our team to make sure we get you an update and see if we can give you an answer to your question. Thanks for choosing us!

  2. Hi, I put an offer on a short sale. I was told that since everything is done and the short sale has already been approved, all I need to wait on from here to hear back from the bank approving or counter offering our offer. How long is the typical wait in this case?

    1. Hi Nazifa:

      I can’t really give you a time frame because it all depends on the lenders involved in the short sale. The best possible advice I can give you is to just regularly keep in contact with the lenders and/or this short sale negotiator. Just keep asking for regular updates.

      Thanks,
      Kevin Graham

  3. So can a short sale take 6 months do it to close? I’m in a situation whrre the banks approved the short sale but my broker says it is still pending. I am a brokers assistant and get paid on commission. He was telling me that it will close vefore christmas, since I got the agreement in August of 2016. I am now wondering the sale actually closed. How can I check?

    1. Hi Caleb:

      Short sales can take quite a long time because there’s moving parts with multiple lenders. However, your next step would be to contact the lenders and see what they say.

      Thanks,
      Kevin

  4. I made an offer on a short sale May 17th 2016 it was approved by the seller I am still waiting and this is November to hear anything from the bank the Sellers realtor is not helpful he constantly says I have not heard anything is there anyway I can find out something??? It has been very very long wait. First of all we waited for months and then the other realtor said there was a second mortgage from Fannie Mae and because I made my offer in 3 days it needed to be in 5 days so I had to back out of the deal along with the seller and redo it so they could wait 5 days and start all over again what are they doing?? Is this something that normal? Please help me

    1. Short sales can take quite a while and I know you may be running out of patience. Unfortunately, with a second mortgage, things tend to be even more complicated because you need to get approval from both lenders. Just stay on the lender.

  5. 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

    1. Hi Ashley:

      It seems like this is taking a while, but every situation is different. I’m going to have someone reach out and help you look into this.

      1. Hey Kevin, everything is in order for short sale but QL will not set a closing date why. Waited the time line 45 to 60 days as R Agent. Pittsburgh Pennsylvania 3009 willet Rd. 15227 Caldwell banker

        1. Hi Mik:

          I’m sorry to hear you’ve had a poor experience with us. We are currently looking into this and someone will be reaching out to you to see if we can get this turned around. Thank you very much for contacting us!

          Kevin Graham

      1. Hi Francine:

        Short sales often take longer because the other bank has to approve the sale among other factors. You can do everything right and it’s still going to take a while. I know it’s frustrating, but the only thing you can do at this point is probably keep on them for updates.

        Thanks,
        Kevin Graham

  6. 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

  7. 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

    2. My husband and I are in the same process in short sale, approved by the bank, what happened when the seller said that the price is less that the house is worth? Our lease expire soon and we do not really want to renew it in case we get the house sooner, because it will be 2 places to pay but do not want to be without a roof. Do you know or have an idea how long we might have to wait for the house or to be on the save side sign the renewal ?

      1. Hi Maria:

        I can’t tell if you’re saying you were approved by the bank or if the short sale was approved by the seller’s bank. If you’re referring to your preapproval, that really won’t help unless the other bank approves the price at which you’re buying the short sale. If you mean that the bank has already approved the transaction price, maybe it will go quicker, but it’s really hard to say. Short sales tend to take quite a long time in comparison to regular loans. You could always renew your lease and find someone to sublet. That would be what I would try. It’s probably not what you want to hear, but I hope this helps.

        Thanks,
        Kevin

    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.

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

  9. 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,

  10. 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?

  11. 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. Hi Mary, thanks for reaching out to us. I’ve shared your question with one of our home loan experts who will reach out to you. Thanks and have a great day!

    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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