For a short sale property it means the bank has to agree to let the homeowner off the hook for the mortgage amount owed that is less than the purchase price offered.
Example:
Mortgage Amount $250,000
Current Home Value $150,000
Bank Needs to Forgive the $100,000 Difference, PLUS cover the added closing costs.
It gets sticky on the added costs part, because sometimes they STICK IT to the Buyer. Liens such as water, electric and other city or subdivision issues.
There are no hard rules for short sales. Each bank is different, as is each transaction.
Additionally the timing can be from a couple of weeks if it is an "Approved Short Sale with an Approved Price", to four to five months for one that is just getting started in the lenders approval process. Everything depends on how far along the homeowner and the lender are in the process.
The "PROCESS" includes a hardship letter that is submitted to the lender, explaining why the homeowner cannot keep up with their obligations to the lender.
Tax Returns, Income verifications, Appraisals etc. What takes so long or can take so long is the fact that many of these loans are wrapped up with multiple investors that the banks had sold the loan packages to. Each of them has to be contacted and agree to the reduction in their profit. Depending on how many are involved, this can take months and the listed price is not always approved by the sellers banks, until they have there own current appraisal completed. This can result in the sellers bank asking for a higher purchase price then what was offered by the buyers.
If the process is not being handled by the sellers attorney, title company, or an agent who has short sale experience, we recommend steering clear of these transactions. It is rare that a homeowner can get this process completed on their own.
This is the short version of the process. Some you should run from and some are worth the risk. It is a case by case basis.
