That’s a question I get asked almost daily? My usual answer is that the time required for short sales can very greatly, but that typically buyers can expect to wait two to three months to receive a response from the seller’s lien holder(s) regarding the buyer’s offer. I often add that every short sale transaction is unique and many factors exist that can impact the time required.
I realize that such an answer is not very precise, so in an attempt to provide a better answer I decided to take a fresh look at the time required to close short sales.
For this exercise I pulled the Reno-Sparks house and condo sales from the past 90 days. As of this writing our MLS is reporting 1,681 sales during the last 90 days. Of those, 702 were classified as short sales. In order to derive the time required to close on a short sale once a buyer’s offer has been accepted by the homeowner I extracted the contract date and the “off market” date for these 702 recently sold short sale listings. I then computed the difference between the two dates to determine the number of days from start (contract) to finish (closing).
Here is what I found…
- average: 124 days
- median: 108 days
- maximum: 716 days
It should be noted that a typical escrow period lasts ~30 days once lien holder approval of the short sale has been received by all parties. Therefore, one may want to subtract 30 days from the numbers above in order to get the number of days required to receive lien holder approval, instead of the number of days needed to close. It’s your choice on how you want to look at it. [Note: a 30 day escrow is typical when the buyer is financing. The escrow period can be shorter when the buyer is paying cash.]
In order to get a sense of the distribution of the days required for these short sales to close see the frequency table below…
|less than 30 days||21||3.0%|
|31- 60 days||87||15.4%|
|91 – 120 days||157||56.7%|
|121 – 150 days||105||71.7%|
|151 – 180 days||70||81.6%|
|181 – 210 days||50||88.7%|
|211 – 240 days||32||93.3%|
|241 – 270 days||22||96.4%|
|271 – 300 days||10||97.9%|
|301 – 330 days||7||98.9%|
|331 – 360 days||4||99.4%|
|more than 360 days||4||100.0%|
As can be seen in the table above more than a third of the short sales closed in three months or less; over half closed in under four months. Assuming a 30-day escrow period, we can presume that lien holder approval of the short sale and offer arrives in three months or less a little more than half the time,
By the time six months is reached over 80 percent of pending short sales have closed. Unfortunately, the flip side to that number is that nearly 20 percent of pending short sales still have not closed after six months.