Short Sale: How Long from Lender Approval do I have to Close?
There are many potential choke points in the short sale pipeline but the most frustrating of all is near the end. Once the lenders sign off on a deal to sell the house the buyer will typically have 30 days to close the deal. Most lenders will extend this another 15-30 days but some are unrelenting.
In a traditional sale contract to closing in 30 days is often not a problem but in a short sale everything is more interesting. Here are a couple of issues:
When should the buyer do a home inspection? Some buyers agents counsel their clients not to do one until after the approval is signed. Bad idea. By the time the lender signs off the clock is ticking and you already need to know what you are getting yourself into. I know the argument is that if the lender does not grant approval then you are out the $300-$500 for the home inspection and any other inspections you need to make the deal. If you really like the house and your offer is at least 80% of what is owed on the property I would suggest taking the chance. If there are issues raised these need to be presented to the bank as proof of the reasonableness of your offer in light of the current condition of the residence. The tragedy would be losing the house because the inspections held things up pushing closing beyond your window. Your risk-comfort level will determine your move here.
Buyer's financing not ready. I know, I have been there. Running around at a frenetic pace trying to secure the last minute documents required by your lender. This is probably the least favorite part I remember about buying my house. It is easy to write here that you should start early, communicate often and keep all of your documents updated for the lender but even if you do things happen. At least you will know you did all you could do to secure the financing. I would also recommend letting your mortgage broker know right up front this is a short sale and when the approval comes in you need to be ready to move in 30 days (maybe with a grace period but don't count on it).
Title Issues. Seller's agent needs to be proactive in working with the Title Agency to order the title work. Of course this is a similar situation to the inspections, no one wants to spend money on a deal that may or may not go through. Sit down and speak with your processor or title agent and discuss with them any recommendations on moving the title work quickly once the approval is in hand.
Why would a lender choose to kill a deal rather than wait another day or two to unload a house? Beats me, but I don't understand a lot of the rationale behind decisions made by lenders and negotiators. The truth is whether you know the reasons why or not, if you want to close the deal you will have to move adeptly in advance of the deadlines.
What else? If you are a title agent or realtor and reading this I would like to hear your advise about the subject. I will quote you if you want but quote or no quote I appreciate any tips you can share, we are in this together for the good of our industry and more importantly our communities.