With a short sale, the seller asks the bank to keep an amount less than what is owed. Even if you made an offer and the seller accepted it, it's not a done deal. The seller's bank must approve the sale, and this is where big delays can occur. Banks lose money in a short sale and aren't very interested in it.
It can take up to 12 months for a lender to process a short sale package, including an offer from a viable buyer. At that time, the buyer must wait for approval from the lender. If no response is received from the lender, then it may be time for the interested buyer to move to another home. Dealing with banks can be very difficult.
Dealing with multiple banks is even worse. When dealing with multiple lenders, the short sale process can be delayed by several weeks or months, as lenders don't communicate or cooperate with each other. Approval times and approval deadlines can cause your short sale to take much longer than expected. Once the approval letter has been issued, your sale will go ahead just like any other.
The buyer will have to pay off their loan, carry out inspections or appraisals (if they haven't already done them) and the lawyers will schedule the closing. The short sale approval letter will always have a limited time, so all parties will want to be prepared to close as soon as possible. You need your lender to approve a short sale. It's not like a normal sale, where all you have to do is try to get the highest price and the buyer pays the mortgage.
On the other hand, if a short sale is made, the bank will accept less money than you are owed for your loan and will not do so unless you are convinced that it is the best of the available options. Despite the efforts of the Obama administration to accelerate and streamline the short selling process, experts say that banks do whatever it takes to get the best result for their bottom line. Buyers can't understand why they don't get a response from the bank when they make a short sale offer. Banks are often late until they can take appropriate action during the foreclosure process.
A bank can sell the property for much less in a foreclosure sale than if it had accepted the short sale process, BUT from the bank's financial perspective, it takes into account the interest payments it received from the seller before the default, the payment from the private mortgage insurer and the proceeds from the sale through foreclosure. Often, the bank doesn't lose much and can sometimes make money from these operations, so it has little incentive to accept a short sell offer.
