Short sale taking forever

20 Replies

I put a house under contract at the end of May.  It was a short sale so we specified a closing date within 60 days.  We also specified that the 8 day inspection period would begin after the bank approved the sale.  After six weeks, the bank finally started working on it to get it approved for a short sale.  At the end of July, we signed an extension of the contract to close by the end of September.  

About mid-September, my real estate agent called me.  She asked me if I could close a few days before the end of the month.  I figured the next step was to do a final inspection to make sure there was nothing else wrong with the house that I didn't already know about.  So we set a tentative date, and I got an inspection.  We found out that the electrical had to be upgraded for about $1200, but no new problems came up.  We amended the price by $2500.  One day after the contract "expired", I signed another extension for a closing date by November 30th.  Since then my agent has been very quiet.  She still hasn't sent me copies of the price amendment and extension signed by the seller.  She hasn't contacted me unless I contact her first.  

In early December, I emailed her asking her if we needed to sign another extension.  She said the seller's agent was working on it and she would be in touch with me.  

After a couple weeks, I email her for updates.  She said that the other agent was constantly trying to get the bank to move towards closing.  She said they had never had a bank move that slowly.  

In late December, I email her reminding her that we still hadn't signed an extension.  She said the other agent would get it sent out.

I still haven't heard anything from her.  This is my first deal so I don't know how it should work.  Is this situation unusual?  Should I be concerned that the contract has expired over a month ago?  Should I let this go and get my earnest back?  I really want to get started investing in RE, but my money is tied up waiting on this house to close.

Not unusual. I would have advised you to not give anyone any earnest money until you had the approval from the lender.  The seller's acceptance of your contract is a necessary step, but it's only value is to get the bank to start looking at the deal.  Its  the bank's approval that matters.

My agent hasn't given me any details as to what the bank is doing.  I only have $500 earnest money at the title company but I have $44000 sitting in my bank waiting to buy the house.  I would love to put it to use.

Is the contract still valid since it is over a month past the closing date?  If not, what would I do to get my earnest back?

Have your agent send a cancelation of contract form, or whatever is used there, if you're "out of contract".  This is another reason we do inspections up front, it's ridiculous to go through all the work getting a short sale approved, then the buyer either walks, or wants to change the price because they're just now doing their inspection.  Others will disagree, but I don't let sellers sign a short sale contract like this, for this very reason.  The seller is now that much closer to an auction date, and may not have time to go through the process again.

Fortunately my agent called me this week and explained why the bank is moving so slowly.  It sounds like they are moving towards approving the sale now.  Hopefully, I won't have to back out now.

How good of a deal is it? You are already in this far, if the numbers are good and you are getting a great discount it may be worth it to hold on. 

There is certainly an opportunity cost due to the long timeline, However, this is not uncommon with Short Sales. In fact, this should be expected. What shouldn't be expected is your agents poor communication and seeming lack of resolve. Should you consider doing short sales agian I would recommend finding an agent that has made it their bread and butter for the past several years. You need to have someone that is intimately familiar with the process, preferably one that has done them for investors regularly.  Most agents don't have an in depth understanding of short sales and doing a retail short sale is much different from doing one for an investor. Not to mention most short sale certification classes are a joke.  

I'm buying it for $41700. ARV is about $65000. Repairs will cost 6k at most if I do the painting myself. It would proably rent for $750. It's not a home run, but for my first deal it seems good enough. Not to mention, having at least one deal under my belt would give me some credibility and a lot more confidence.

@Chad Skiles  sorry for digging up this old thread. Just want to see if you would provide some update. It sounds like a good deal worth the long waiting. 

The banks still hasn't approved it yet.  I'm just going to keep waiting for them to get it figured out.  In the mean time, I am sending out mailers so that I can get some other deals.  I will be looking for deals to wholesale or to buy "Sub To" for buy and hold.

I'm curious to know what ultimately happened with this pending sale.

Chad I'd be curious as well.  Nice to see a fellow Wichitan on here...what part of town did you (or not) purchase the property in?

Short sales are not short!  Our have taken 8+ months before!  So NOT short :) They can be great deals and they can not be when the bank finally approves "their" price (not necessarily the one you offered) lol! 

We have successfully closed 5 short sales and have lost or walk away from many more than that! The key is to have patience and to look around. We have gotten some FANTASTIC deals, but make sure you know the value. We have also seen the bank try to go up to or above the market value. 

Good Luck!

At the end of April, the extension expired.  I was going to tell my agent to cancel the contract, because I had lost all faith in the bank to deal with the situation.  However before I got around to it, my agent called me and said that the bank was wanting to move toward closing in the next month and a half.  She just needed me to sign another extension so the contract was current.  I signed another extension until the end of June.  That was about 45 days ago.  I have not heard anything yet.

It is now going on 13 months since we signed the contract.

Originally posted by @Shane H. :

Chad I'd be curious as well.  Nice to see a fellow Wichitan on here...what part of town did you (or not) purchase the property in?

 McCormick and Seneca

wow no way I would have that kind of patience....I am under contract on a banked owned foreclosure and I had the inspection and appraisal done within a week of going under contract...I am closing in exactly 30 days ....and I am in a very hot market and people are very busy this time of year.

Originally posted by @Shane H. :

@Chad Skiles

Did you ever get this deal closed?

No.  We still haven't closed.  Last week I told my agent that I was finished waiting on the bank to approve it and that I want to cancel the contract.  I am now waiting on the seller to sign the release of earnest form.

The seller agent had filed a complaint with HUD. HUD had investigated the reason for the delay. The bank had the needed approval from HUD to close. But they were still dragging their feet.

WOW, what a long wait. Good luck I hope you find something better.