How Long Does It Take for a Short Sale to Close After the Offer Is Accepted?
When the purchase price in a real estate transaction is less than the amount of debt on the property the sale is "short." Property owners typically enter into short sale transactions when property values decline and the market value is no longer equal to or greater than the property's debt.
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Features
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Before listing real estate in a short sale, the property owner seeks permission from his lender. The lender often requires the borrower to show, by way of an appraisal, a comparative market analysis (CMA) or a Broker's Price Opinion (PBO) that the current market value is less than the loan amount, and that the borrower is financially unable to continue making the loan payments.
Significance
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The property owner is the seller during the short sale transaction. While the property owner is the one who initially accepts the offer from the buyer, it then goes to the lender for final approval. This can take a few days, weeks or months. Just because the property owner accepted the offer, does not mean the lender will accept. The lender can accept, reject or counter the buyer's offer. This can happen even if the buyer made a full-price offer.
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Misconceptions
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Property buyers looking for "deals" sometimes perceive short sales as a better value than a non-short sale listing, similar to the perception of foreclosure properties. Just because real estate lists for below the debt on the property does not mean it is a real estate bargain. The buyer's concern should be the current market value, not the property's debt.
Considerations
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In traditional real estate transactions, the contract might include the closing date, giving the buyer a clear understanding of when the property should close. In a short sale, the buyer does not have an approved contract after the seller accepts the offer. Not until the lender officially accepts the terms offered by the buyer, in writing, can the buyer have a better understanding of when the property will close. The actual closing date will depend on the terms of the contract and state law.
Warning
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Real estate buyers anxious for a quick closing might want to reconsider entering into a short sale transaction. Short sales are often a long process, and until the lender signs the final papers, it is always possible that the lender will reject the offer even after months of negotiations.
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References
- Photo Credit House for sale image by Heng kong Chen from Fotolia.com
