Why do short sales take so long?
When you see a large lender like Bank of America or Wells Fargo, you usually think it’s the bank that is losing money on the loan if they decide to sell the home for less than what is owed.
But the truth to the matter is that for “most” of these loans, there is an investor who has asked these lenders to loan out a block of money, usually in the hundreds of millions of dollars and the banks are just servicing them. It’s not the banks money, it’s the investors or a group of investors who have their money on the line. There is also Fannie and Freddie Mac government backed loans.
Remember, these investors have never seen the home. All they see is numbers. They are relying on the listing agent to get as much money back as possible for their investment.
The lender and investors are also worried about fraud. How do they know if the home owner is selling their home to a friend or relative for a lot less than what the home is worth? They don’t. They need to do their due diligence as best as possible.
It’s called an arms length transaction where all the parties sign a document that there are no side deals and that they don’t know each other.
Another reason the short sales take so long is because many times there is more than one loan and you are now trying to satisfy two or three lenders/investors. That’s very time consuming. Many lenders are also under staffed. They have thousands of delinquent loans, and only so many employees to service them. Remember, many banks have gone under and are on longer in business, so they have had to cut down on their payroll.
The home owner can also be the one who is delaying the time line. Either because they have failed to provide all their financial’s and a hardship letter, or maybe because they want to live in the home as long as they can without having to pay their mortgage. What lender(s) have done to take steps to shorten the time line?
Wachovia is the leader among all the lenders up to now. They have addressed this problem by setting up a system where they have a manager come out and meet with the home owner and listing agent and they determine what fair market value is.
Once they receive an offer, it only takes 45 days for them to make it happen. Wachovia is by far the most advanced up to now.
I’ve recently heard rumors that Wells Fargo is about to start a pilot program where after a home owner is turned down for a loan modification, they will agree to a short sale with the home owner.
If you have any question about short sales or any real estate related questions, please feel free to write or call.