Yes, they are very time consuming, often taking more than 120 days to process. Only 1 in 3 are successful. If your price and the banks are far apart, you are likely not to be successful.

I am just finishing up with a short sale. In my experience, the process has taken about 5 months. We have had to fax everything multiple times to multiple people. Just when you think they have everything they need, the fax didn't go through or they never received it. Multiple phone calls between the agent and the bank, patience with the bank, and the willingness to let your house go for WAY under what you paid. I paid $121, owe about $115 and am selling the house for $40k. I feel as though the bank is trying to wear you out by requesting so much stuff and requesting it multiple times. Perhaps they want to see if you are really serious about it. Also, make sure the house is empty and the loan is behind or else they won't even talk to you. Be prepared for a really long and difficult process, but I am waiting for the final okay and I think I might be one of the lucky ones who makes this work. Good luck!

Adrain,

Short Sales are the worst, My personal experience is 9 out of 10 fail.
The Bush Administration has just waived the Debt Forgiveness tax, on Short sales debt, 1099.

I think this move will bring us to a 6 0r 7 out of 10 fail rate.

An improvement, however 60 to 70% will still fail.

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=…

My personal experience in the nineties only 1 out 5 escrows closed.

MLS stats (ciphered below) suggest that 16% of short sale listings in 1st half 2007 went to escrow or were sold. The escrow fall out rate is time consuming to analyze statistically, so I have not yet done that . I believe the escrow fall out rate is very high.


Details:

I ran this analysis which estimates the percentage of short sales listings that sold The data base was from listings whose sale, pending, withdrawn or expired date was in 2007 Area: 7 major counties covered by Metrolist Sacramento Valley. Active listings are mentioned only as reference point; I did not predict the percentage of active short sale listings that might succeed.

Date of the analysis was August 24th,2007:

- There are 1083 active short sale listings; 1975 listings have been withdrawn and 785 expired since the first of the year, 55 are temporarily off market. There are 213 pending short sales, 29 are expired pending and there are 293 closed short sales. If we assume that all the expired pendings and pendings close, and assume that none of the expireds, withdrawns and temporary offs sell,
then the ratio is 3350/ 535.----16% sold, 84% did not sell,
or about 1 in 6 got sold. If a lot of the pendings fall out of escrow (likely) that ratio could be much worse perhaps as bad as only 1 in 7 or 1 in 8 -

As for the percent that fell out of escrow, that statistic could be obtained from MLS data but would require hand sorting or special software. My personal anecdotal experience in the nineties was that one out of five short sale escrows closed. After the 4th burn, I managed to dissuade subsequent buyers away from short sale listings and eliminated them from search results disseminated to my buyers. My professional opinion was that avoiding entanglements in short sales was in the best interests of buyers that I represented.

I'm a short sale consultant. I work with all of the banks and talk to loss mitigation departments every day. It's difficult if you've never done a short sale before. If you know what you're doing, its fairly straightforward, but it takes time (lots of time!). We get approvals on 75-80% of our short sale requests by simply pricing the home right, sending a package the way the bank wants to see it, and following up. If any real estate agents are reading this, use a short sale consultant. It will save you time and probably make you money (as you are much more likely to get the bank to approve the sale). Feel free to contact me if you need help...

The success of a short sale depends largely on how willing the bank is to cooperate and how strong of a negotiator the listing agent is. If the listing agent has weak negotiating skills, you've lost half your battle. The rest doesn't matter nearly as much unless the buyer decides to walk away because the bank is taking too long to make a decision.

Everyone involved in a short sale must be completely dedicated to closing the deal.

Your seller must open the lines of communication with the bank early, and be dedicated to spending countless hours on the phone with the bank's loss mitigation people, and submit countless financial documents (bank statements, tax returns, P&L statements if they are self-employed, etc.). They must swallow the pill that their house is likely worth a lot less than they think it is, be willing to price it in line with recent comps in the area, and accept an offer to submit with the bank. They must seek legal and tax advice, and be ok with any possible consequences of doing a short sale.

The listing agent must price the property correctly, market the property aggressively, and get an offer on the property to submit to the bank...they too will spend countless hours on the phone with the bank(s) loss mitigation people, provide comps, be patient, and follow-up diligently. If the listing agent is lucky, there will only be one bank to deal with.

The buyer must be prepared to wait 60-90 days for an answer from the bank if they will even agree to a short sale. They must expect to take the property as-is, expect to pay ALL of their own closing costs, and expect to pay for all inspection costs. Whatever loan program they have qualified for now may not be available in 4-6 months or interest rates may jump if and when they are able to close escrow...financing must be rock solid.

The buyer's agent must be patient, and explain to their buyer what the process is...expect for the bank to reduce the agent commissions.

The bank(s) must be willing to take the loss on the property. They will calculate the costs of offering a short payoff versus going through the foreclosure process. If a short sale makes sense to them, the seller and listing agent have provided sufficient information, the buyer can be patient and wait for an answer, and their financing is still available, then hey - there may be a deal!

It is not uncommon that the bank will reject a short sale for whatever reason. You do not have a binding contract until the bank consents in writing to the short payoff specifically with regard to your purchase agreement...

I could go on and on about short sales...pros and cons...there are lots of each. They can be a big win-win or a complete waste of time.

This depends on how many months late your seller is, and how willing is the bank(s) to sell the home short. You can minimize your risk by talking with the banks first and seeing where the market is for the home. If there too far apart, then its better you not list the home.

Adrian, the difficulty is twofold: 1) convincing the lender(s) to accept less, 2) getting the buyers prepared to act fast (e.g. have money ready to close) even when the timeline may be 90 days. The other problem is finances for the buyer, as rate locks may expire prior to closing.

Hi Adrain,

It depends on how willing your seller's are to do whatever is necessary to prepare their home for sale, how aggressively and market appropriately you price the home and how willing the bank is to accept the offers you receive. A short sale requires that you as the agent need to "sell" the deal to the bank as they have the final say.

You also need to educate the buyers interested in the property about the timelines they are likely to face and you need to make sure that any of the service providers are aware of the situation and are also willing to do whatever is necessary to successfully close the sale.

Hope this helps :-)

Take care,

Tisza Major-Posner, Realtor, Keller Williams Claremont/La Verne (909) 837-8922