Expert: Diann Tonnesen - 5/8/2011

Question
Hi there. Me and my husband would like to buy a condo but is currently stuck in a lease until November of this year (about 7 months or so). There is a a particular home we currently found that is in a short sale and has been on the market for 6 months.
--What is the average time that it takes for a short sale to be completed? I have heard the process takes anywhere from 1 month to almost a year! Is this true in a short sale?
---Also if we were to buy now, would there be an option to some how push our payments back since we'd be moving into the home at a later date?
--- On the flier of this particular home, it stated that there is a grant that helps buyers with down payment assistance. It also implies that you do not have to pay this back. Who offers this type of program? (we live in CA)

Answer
Hi Nicole,

Is this home located in California? If so, you will have to check with a local real estate agent to find out about the grants available in your area. There are quite a number of grant programs, but most of them are location specific. Some you do not have to repay, others you have to repay a portion of you sell within a certain time period, and others are repayable in full, so make sure to read the fine print!

When you make an offer on a short sale, the contract is presented to the bank. Keep in mind that the bank is usually just a servicing company representing the actual entity or individual who is really owed the mortgage money. The bank performs its due diligence, collecting information about the seller and the seller's financial status and ordering an appraisal of the property. When the bank collects all this information it passes the file on to the investor to review and approve or disapprove. This process can take anywhere from one to three months (it has gotten quite a bit faster in the past year).

Once the investor approves the short sale, you will have to close in about 30 days. But there is NO guarantee that the investor will approve the short sale at all. Or they may counter your original offer with a higher sales price. So you may be waiting two or three months to get an answer and find out you don't have a deal at all.

So in reality it will take between two months to five months to close on a short sale if it is approved at all, and there is no way of knowing which end of that time frame you will fall into. Unfortunately you will not be able to push your payments back if you need to close before your lease is up, so it would be best to wait until at least September before you start seriously looking.

Also, since there is no way of knowing in advance how long any particular short sale will take, you have to be prepared to be VERY flexible about moving. (Even if you are told it will close in 30 days, if a last minute lien pops up against the seller, it might take another 30 days to release that lien.) If you are able to extend your lease on a month to month basis, that would be best. But if you don't have that flexibility, I would steer clear of short sales. The whole process is very unpredictable.

Hope that helps and if you have more questions, fire away!