Patty Manzi’s Tri-Valley Real Estate Blog

I get asked this questions several times a week and the short answer is that there is no exact time-frame. Whether you are buying Pleasanton Real Estate or anywhere else in California, every short sale is unique, therefore, the time lines to complete the transactions are unique.

Some short sales can be completed within 90 days, some can take up to a year. Why the big difference in time?  To answer that question, you need a little education on the process of a short sale.

When a contract on a short sale property is negotiated between a buyer and seller, the contract is then forwarded to the bank (sellers  lender) for approval.  That approval process can take weeks or months.  Typically with large banks there is a specific protocol that must be followed.  There is a list of documents that must be submitted with the purchase contract.  Account numbers & sellers names must be printed on each page (some banks require the sellers signature on each page), then the whole package needs to be faxed to the bank.  It can take anywhere from 7 -21 business days for the fax to be ‘digitally imaged’ into their system.  Once that is completed, the file can be opened and viewed by the short sale department.  After the file is opened, it need to be reviewed and assigned to a ‘negotiator’ which takes an additional 7 – 21 business days.  Once the negotiator has the file, they have another 7-21 business days to contact the sellers agent to start the process of determining whether they will accept the buyers offer.  So in reality it could take 3 months or more just to get the offer in front of the negotiator before any actual negotiations take place.  And if there is more than one lender in the transaction, that will take even longer as the 1st lender has to negotiate with the 2nd lender (and maybe even a 3rd), before determining if they will approve the short sale.  During this time the listing agent will be on the phone daily or weekly getting updates on the process, and depending on hold times, these calls can take hours.

If you are considering a short sale (on either side) it would be wise to select an agent that you feel confident will take the initiative to follow up consistently with all parties to the transaction, and make weekly, or sometimes even daily phone calls to the lending institutions for updates.

So the long answer is that short-sales can take a very long time, and in some cases even after all the waiting, there is no guarantee the bank will accept the offer.  But in the end, it can be worth the wait – if you have the time & patience to wait.

I recently heard a horror story and though I would share it with you. 

A family made an offer on a property, it was a distressed property so they were dealing with the sellers bank.  After the offer was submitted to the bank, the bank came back with an addendum that said there was NO Inspection Contingency period, and the buyer would be accepting the house AS-IS.  So the family, with the knowledge of their agent, decided to accept the banks addendum.  The buyer, and apparently the agent as well, mistakenly thought this addendum meant the bank was not allowing them to have any property inspections - so they didn’t!.  After escrow was closed the buyer called the utility company to have the power turned on.  They moved into the house and guess what?  No Power!  The utility company said the service was connected to the home, so the lack of power meant they had other electrical issues inside the house.  As more details of this story unfolded, it was apparent that the house never did have power.  When they initially saw the house the utilities were turned off.  At no time did anyone (sellers agent, buyers agent, buyer, seller) suggest the power be turned on so they could make sure everything worked. As a result, this buyer is now having to do electrical repairs so they can live in the house  - and they are very very sad, dissappointed, and angry.  And they should be!

First of all, when any contract says that a sale is AS-IS, the buyer still has the right to know what the “AS-IS” is.  You HAVE to know what you are buying.  Banks cannot disclose the condition of a property because they have not lived there.  Their contracts are AS-IS because they have no knowledge of the property condition.  It is the responsibility of the buyer to INVESTIGATE the condition of the property.  And by investigate, I mean order ALL THE PROPERTY INSPECTIONS YOU WISH TO HAVE. 

When a banks addendum says there is NO Inspection Contingency, that ONLY means the buyer will not have the typical  ’grace period’ after the inspection in which they can cancel the contract based on the results of the inspection.  It DOES NOT mean that you relinquish your right to have inspections.  The bank won’t know, or even care if you have inspections that are not part of the contract, just like they won’t know what you had for breakfast today. 

Always, always, always get inspections when you are buying a home!

I talk to lots of people about buying homes.  Not long ago I was talking to a newlywed couple and they mentioned they wanted to buy a house and they were saving for a down-payment.  I then asked them what else they were doing to prepare for the home purchase.  They looked at me with a most quizzical expression and asked “What do you mean”? 

While a down-payment is a necessity, it takes much more than a down-payment to buy a home.  Buying the home is the goal and to accomplish this goal you must have an ‘Action Plan’ to get there!  What do I mean by action plan?  I mean there are many steps that must be taken along the way prior to the home purchase.  For example:

• Do you know what your credit score is?  This is an important factor in obtaining a loan.   You must have a minimum credit score to qualify for a loan.  Your credit score is based on your payment history (on time & delinquent) and how much debt you have. 
• Have you seen a copy of your credit report? This is very important.  You can download a free copy of your credit report every year from each of the three credit bureaus.  This report contains a list of your creditors, balances, payment history, and personal information.  It is a good idea to get this report and verify that the information is correct.  There could be outdated or incorrect information on your report that negatively affects your credit score.  You can contact the credit bureau directly to dispute or correct information.  This may take some time so factor that into your timeline of your action plan.
• Have you spoken with a lender about how much house you can afford now? Another very important step.  A lender will meet with you and get a picture of what your financial status is and advise you of where you need to be prior to purchasing a home.  The lender can also advise you of what documentation will be required to qualify for a loan (pay stubs, tax returns, employment verifications, etc.)
• Have you educated yourself about down-payment assistance programs that might be available to you? Your lender can assist you with this information.  There is also a great organization called the Tri-Valley Housing Opportunities Center.  The Tri-Valley Housing Opportunity Center  (TVHOC) provides home-buyer pre and post purchase education, income and asset development education, information regarding private sector lender programs, and funding sources – helping match those in need with programs and services that benefit them most.

After performing these tasks, you may find out that you may have some financial work to do before you can buy a home, and you can establish a time line (action plan) for accomplishing this goal.  Or you may find out that you are financially ready right now.  Either way it is worth the effort to be educated, informed, and prepared.

I recently heard a story about a buyer who was in contract to buy a home, had received his loan approval, then went out and bought a car using a cash down payment!  Long story short, the loan was rejected in final underwriting review because the purchase of the new car had changed the debt to income ratio and also changed the amount of the cash reserves the buyer had on hand. 

This reminded me of a list someone had given me years ago, so I dug it out of my files, and I am posting it here to share with you~

The Ten Commandments for Buyers……. Until Your House Closes

1. Thou shalt not buy a new car
2. Thou shalt not buy furniture for the new house or any other big expenditures that affect your bank accounts
3. Thou shalt not make any unexpected or unexplained large deposits that affect your bank balance (unless it is a work related bonus, or a tax return, and then keep a copy of the check/deposit)
4. Thou shalt not apply for any credit anywhere, and thou shalt tear up all of the offers for “Pre-Approved Credit Cards” that come in the mail
5. Thou shalt not run up the credit cards that you already have
6. Thou shalt not retire or voluntarily leave your present employment or change employment status
7. Thou shalt advise your agent and your lender of any unexpected changes in your life, especially if it changes your marital status.
8. Thou shalt not leave to go on vacation during the escrow process without notifying your agent or lender
9. Thou shalt not spend money you will need for your down-payment and closing costs
10. Thou shalt not be late paying any accounts during the escrow period

Here is a little information on home warranties for resale and new homes.

Resale Home Warranties-

When you purchase a resale home, you can purchase a home warranty plan that will protect you against most ordinary flaws and breakdowns for at least the first year of occupancy.  The warranty may be offered by the Seller as part of the overall package, but if it is not offered, it is well worth the investment to purchase it yourself.  A home warranty program will give you peace of mind, knowing the major covered components of your home will be repaired if necessary.  Coverage for home warranty plans start with a basic plan with an option to purchase additional coverage for specific things like appliances, pool equipment, and air-conditioning.  Your real estate agent will be able to provide you with names of local home warranty companies in your area.  I suggest contacting the companies to inquire about their pricing, coverage, and deductibles for service calls.

New Home Warranties-

When you purchase a newly built home, the builder usually offers some sort of full or limited warranty on things such as the quality of design, materials, and workmanship.  These warranties are usually for a period of one-year from the date of purchase of the home.  At closing the builder will assign to you the manufacturer’s warranties that were provided to the builder for materials, appliances, fixtures, etc.  For example, if your dishwasher were to become faulty within one year from the purchase of your newly built home, you would call the manufacturer of the dishwasher – not the builder.

If the home builder does not offer a warranty, BE SURE TO ASK WHY!