The excitement of an announced short sale is often short-lived. Buyers spot the properties on the internet and make an offer. Unfortunately, time often drags on while they wait to hear back from the bank and the excitement fades. The majority of offers on short sale properties end with no response from the bank or a declined offer.
According to RealtyTrac, short sale homes not yet in foreclosure took an average of eight months to sell. Normal houses being offered on the market often take just 30 days to close. Not only does the closing take a much longer period of time, but the person making the offer has to first wait for the bank to consider their offer at all. That can take an additional 4-6 months. Short sales are often not short at all.
Why does the process of buying a home from a short sale take so long anyway? In the current real estate market, there are a large number of properties that have lost their value, houses in pre-foreclosure and foreclosed properties. Banks trying to juggle all of these different types of real estate have a lot on their hands, which makes everything run slower. Decisions take time and the steps from offer to completed sale can take longer than usual. Most people who put an offer in on a short sale house do not stick around for eight months to close the deal.
A short sale starts when a property owner basically asks the bank to take a loss on the mortgage or loan. This happens before the owner defaults on the loan and has not been foreclosed on yet. They are still covering their monthly bills, but the property is no longer worth the total amount they originally paid for it, or the amount their mortgage is for.
Foreclosures create less conflict for banks since there is no personal choice involved. A bank president will not have to explain why the foreclosure happened, as he or she may have to justify the decision during a short sale. Bank presidents would rather avoid any problems or ambiguity surrounding the short sale of real estate property and this is another factor in the lengthy response time.