How long does it take for a Lender to approve a Short Sale sales contract?

The typical response time for a Short Sale approval is 2-4 months (60-120 days). While you can often find great deals in buying Short Sales, it does take a lot of patience.

If the home owner agrees to my sales contract, am I gauranteed the purchase of the property?

No. When you submit an offer on a 'Short Sale' property, you need not only the home owners approval but that approval of all lien holders.

How many lien holders are their usually? And who would they be?

A 1st Mortgage and 2nd Mortgage are the typical Lien holders, but additional smaller liens are also common. Lien holder can be banks, private money lenders, the government, court judgements, credit card companies, contractors for home repairs and more.

Does just the 1st Mortgage need to approve the sale? Or all lien holders?

If their are additional liens beyond just the 1st mortgage, then all other lien holders must also approve the sale for the deal to take place.

Why do I even bother signing a contract with the seller?

In Connecticut the seller 'owns' the property, not the lender. Therefore the seller is the only one with the ability to sell or not sell the property. You must get the sellers acceptance before the lien holders will even look at a short sale. Additionally, once you get the sellers acceptance on contract, the property is put 'Under Deposit' and no more contracts are accepted for the property.

Do I need to submit any additional paperwork with my contract?

Generally you will present a standard sales contract to the seller and an attached adendum stating you understand the sale of the property is void if any lender refuses the short sale payoff. The additional adendum can be provided by the seller, or you can write your own.

What happens after the seller signs my contract and the property is considered 'Under Deposit'?

From their the Listing Agent will send all lien holders the signed sales contract along with the homeowners proof of hardship stating they're no longer able to continue making mortgage payments. (aka Short Sale Pacakge).

Once the bank receives all the documentation, it is placed in line to be reviewed by the loss mitigator. It can take several weeks just for the loss mitigator to get to the file. Once the loss mitigator reaches the file and begins assessing the situation, a BPO Agent or an Appraiser is sent to the property to report the properties current value for the lenders consideration. The Appraisal is sent back to the lender and again the bank spends several days / weeks assessing and comparing the loan and property values. Occassionally the lender will request a second appraisal to get a more acturate property value.

After several weeks (more like months), the bank finally comes to a conclusion as to whether selling the property today nets them more money than waiting months for a foreclosure, and paying attorney fees, realtor fees and property management fees.

What happens if the bank accepts the Short Sale sales contract?

If the Short Sale is accepted, the lien holder(s) will call the listing agent to confirm and send the listing agent a letter of acceptance of the mortgage payoff. The lien holder(s) will also usually require the closing be held no more than 30 days from the date of approval.

What happens if the bank denies the Short Sale sales contract?

If your Short Sale sales contract is denied, your purchase offer becomes void and their is no deal. But the bank will often hint to the listing agent a value you would like to net, and you can submit a new purchase offer or simply move on to another property.

What is my next step after the lien holders accept my Short Sale sales contract?

At this point any inspections and your mortgage financing should be pursued and a final closing date should be set.