What is a short sale?
A "short sale" occurs if two things happen:
- The seller is attempting to sell for less than they owe
- The seller is unable to make good on the balance on his or her own
If the seller owes $100,000 and accepts a contract that would net $99,000 after real estate commissions and other fees, but brings the $1,000 to closing, it is not a short sale. That closing would occur at the same rate and speed as any other normal purchase.
A short sale is the alternative to an executed foreclosure and can sometimes be cheaper for the seller and lender. It is a significantly more complicated transaction and requires more time.
Why do short sales take so long?
Very simply, they should take at least 50% longer. This is not a normal two-party contract. The seller's decision for a short sale means that the lender now brings us to a party of three--a 50% jump in participants alone.
It is no secret that banks are not in the "selling real estate" business, but that's not why this takes so long.
The buyer and seller have fairly simple jobs, buy and sell. The bank has a number of options. Is it best for them to agree to a short-sale? Agree to a short-sale, but counter the price? Is a foreclosure best? Compared to a normal purchase, a short sale includes one extra party, who has at least three or four alternatives to weigh out, and has less of a sense of urgency.
In an oversimplied way, that's why short sales take so long.
