How long does it take for a bank to approve a short sale?

In June 2012, new regulations from the Federal Housing Finance Agency changed the way banks process short sales. Banks must review short sale requests within 30 days and have a maximum of 60 days to make a decision. The goal is to speed up the short sale process and reduce the number of foreclosed homes.

How long can a short sale last before being closed out?

There are no set rules regarding how long a short sale can last before being closed out. The lender of the shorted shares can request that the shares be returned by the investor at any time, with minimal notice, but this rarely happens in practice so long as the short seller keeps paying its margin interest.

Which is the best definition of a short sale?

A short sale is the sale of an asset or stock the seller does not own. It is generally a transaction in which an investor sells borrowed securities in anticipation of a price decline; the seller is then required to return an equal number of shares at some point in the future. Contrastingly, a seller owns the security or stock in a long position.

Can a short sale be cut short by foreclosure?

Whether or not your short sale is cut short by foreclosure depends on two factors: your lender’s policies and time. Some lenders will postpone foreclosure proceedings after approving a short sale offer in order to allow the sale to take place.

How is a short sale approved by the lender?

Therefore, the usual way a short sale can be approved is for a buyer to submit an offer. The process will usually play out something like this: The selling agent lists the short sale. The seller delivers the lender’s required documents to the agent. The buyer submits an offer subject to lender approval.

What happens if the seller refuses to do a short sale?

The seller of the property will normally have to pay some money at closing or agree to an unsecured debt in order to have the short sale approved. If the seller refuses, then a short sale may fall through even if the seller has approved the sale.

How long does it take to close a short sale?

The short sale process may take more time than a traditional retail sale to complete and it may be difficult to pin down a firm closing date until the seller’s mortgage lender (s) agrees to the short sale. Junior-lien holders such as second mortgages, HELOC lenders and other special assessment liens may also need to approve the short sale.

Can a property be classified as a short sale?

Just because someone advertises a property as a short sale does not mean they have been approved for one. They may think they qualify for a short sale, but unless they are actually approved by the bank or mortgage lender, this classification means nothing.

Can a short sale cause a bank to release a loan?

It might or might not require that the seller have a financial hardship, but the home is most certainly underwater. And this can cause serious problems without a release. Banks agree to release the loan in exchange for receiving less than the amount owed in a short sale, but this doesn’t necessarily release the seller from any obligation to pay it.

How does a short sale work in real estate?

In a short sale, you sell your home for less than the total debt balance. The lender agrees to accept the sale proceeds and release the lien on the property. The proceeds of the sale pay off a portion of the amount owed.

Can a bank collect the balance on a short sale?

The bank might retain a right to collect the outstanding mortgage balance without such a release—from the homeowner who was desperate enough to ask for short sale approval in the first place. A lender generally agrees to do a short sale because it’s more profitable than it is to foreclose.

When does a lender approve a short sale?

When a lender approves a short sale, it’s agreeing to sell the property for less than the outstanding mortgage balance against it. There’s something in this for the lender when foreclosure seems inevitable.

How does a short sale work to avoid foreclosure?

The lender agrees to accept the sale proceeds and release the lien on the property. The proceeds of the sale pay off a portion of the amount owed. Short sales are one way for borrowers can avoid foreclosure. (Learn more about short sales to avoid of foreclosure .)