Short Sale Phenomenon II

What’s the most mysterious and confusing state for short sale is  “WAITING PERIOD“.

From 2008-2009, average short sale (SS) transactions were 9 months, some were even longer – or never had an end. In 2010, situations had been improved, Banks “promise” “quick close” – still, an average up to 6-month’s in closing transactions.

What’s the delay? Why short sale can’t close. Well, most obviously is the “disagreement of settlement between the 1st and 2nd lenders”.  For instance, the property is already under water, (the loan amount is >  its current property value), and have two loans against the liens.  1st lien has 80% stake on the property, 2nd has 15%. 1st wanted 95% of the current market value, or the entire 100% to cover itself, which left the 2nd loan nothing or a total a wipe-out.  The Banks, usually the servicers of the loans try to negotiate between the two and get a solution. But negotiation often times in stalemate or refusals of settlement, because each party tries to get the most for itself and dispute in the dollar amount in the settlement.

The situation would be easier if loans were under the same lenders. No matter it is one lender or 2 lenders, if the lenders could not approve the settlement (price) the case would keep on “open”, the transaction will not move forward, thus, can’t “close”.

The consumer, on the other hand has been holding for “approved” price (waiting period)  after anxiously submitted offer(s) and winning over other contenders. But time and time again it had led to confusion and disappointments due to ”no response” from the seller.

In the hay days of real estate in Silicon Valley properties were sold over a weekend of open houses or before they were even on MLSs. Short sales  stretch and lengthen the escrow process to unknown stages. No escrow closing time can be properly projected.


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