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Why Short Sales Take So Long

By Tiffany Raiford

With a name like short sale, many buyers think that they've just found themselves the deal of a lifetime. Not only do Rhode Island residents feel that short sale properties are priced well below market value, but they're short, right? Wrong. Short sales are typically anything but short. Why they're named short sales has absolutely nothing to do with the time frame in which it takes to purchase and close on a home and everything to do with the fact that a bank and homeowner have come to an agreement to sell a home short of its value and the money owed on the home.

Definition

In short (pun intended), short sales are home sales that are priced below the owed loan amount on the property. This happens when a homeowner finds that they can no longer afford to live in their home thanks perhaps to job loss, relocation, or even illness and they want to sell their home. However, these homes are often not worth what is owed on them, which is why they can't be sold outright for more than the price owed. Sellers are forced to negotiate with their lender to come up with an agreement. This agreement is called a short sale because the bank has to agree to sell the home for less money than is owed to them.

Long Sales

Short sales take a long time because it's not up to the seller to accept your offer solely. In fact, the seller might accept your offer quickly, but it's up to the bank for the final acceptance. Here is where the process begins to take a long time. The bank is being given less money than it is owed, and that makes the bank less than happy about accepting an offer on a home that's less than the amount owed. They have to review your offer and decide whether or not it's worth it. They can delay the acceptance of your offer for months in hopes that someday a new offer will come in that's higher than yours so that they can recoup some of their losses.

Additionally, there are literally hundreds of pages of documentation required in the short sale packages that lenders require prior to purchase. Most of those pages require signatures by either the seller, buyer, lender or a mixture of several of those. It's very easy with so much paperwork to miss a signature on a page somewhere, leave a page out or misplace a page. This means that the bank will need to find the page or get the proper parties to sign the missing pages. This can take quite a long time. Finally, in the process of accomplishing all this, some of the documents in the original short sale package might become outdated and have to be re-signed and taken care of.

Short sales are typically anything but short. Rhode Island residents interested in this kind of purchase can do several things to make the process as smooth as possible. The first is to hire a real estate agent with knowledge and expertise in short sales. One without this can be detrimental to your purchase. The next thing you can do is to be proactive. This means calling and checking on your application often to remind the bank that you're serious and that you want this to happen.

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