One of the many questions that clients ask when attempting a short sale is, ‘how long is it going to take?’ The short answer is that short sale processing time is different from one bank to the next. The answer requires a detailed analysis of the bank’s process system. There are hundreds of banks in the world we are going to examine just a few of the major ones in order to demystify the process for distressed homeowners.
Since Bank of America (NYSE:BAC) is one of the more popular banks it seems fitting to start an analysis with them. If the Bank of America short sale process could be summed up in one slogan it would be, “Catch-22”. BOFA, tends to be pretty economical when considering to approve a short sale or not. They are not the most generous bank in regards to requests for seller/buyer credits and second lien payoffs. However, they are not the greediest bank either. If Bank of America’s short sale process could be compared to a financial savings instrument it would be considered a bond. The process is less volatile in the long run than some of the other banks (i.e. few quick approvals, but also few high payoff demands).
The catch with their short sale process is that because they are such a large bank they handle a lot of short sale requests. The massive amount of recent short sale requests has made the approval process slow. During the process the file is assigned to several different, “negotiators”.
1. The first phase negotiators are the data collectors. They are responsible for making sure the file is complete before being submitted to upper management. During this phase an appraisal should be ordered if needed.
* Times vary during this phase. If within 15 days there has not been any progress it can be moved to a new negotiator. Escalating the file may or may not be in the best interest, it could cause a new time limit to apply,which would extend the short sale process.
* Once the phase 1 negotiator approves the file it’s passed to a 2nd phase negotiator
2, Phase 2 negotiator; Sometimes this is the same person as Phase 1. During this phase the file is reviewed and any extra data that might be needed is collected. (i.e. updated bank statements, paystubs, etc…). After this phase of the negotiations are completed the file is passed to a third and final level of approval.
3. An estimated 15 day wait period is again applied when the file moves to this level before escalation can be considered. A general rule with BOFA is that every time a file changes hands 15 days must pass before the file can be brought to a supervisor. The third negotiator (upper management) double checks all the figures and puts the stamp of approval on the file. Usually, once this level approves the loan the automated BOFA status line changes. The status can be changed to approved without an actual short sale letter being issued. This phase negotiator has about 3 weeks altogether to actually stamp approval on the package and send out a letter.
In terms of communication most of the time the negotiators will not even talk to you. E-mail may work, but it’s not unusual to go several weeks without hearing any news. The actual approvals are mostly specific to one buyer. If you were thinking about substituting a different buyer into the transaction after the approval letter has been generated you will need approval from BOFA management.
Typically, if a new buyer is brought in on the file while the property is in phase 1 the process resets. If the file has progressed to certain levels of phase 2 there is a higher chance that a new buyer may successfully be brought into the transaction without the process resetting itself. If a new buyer(s) have to be substituted you will want to do it at this phase.
Once the file gets to phase three substitution becomes more difficult with BOFA. Some of the other banks, that will be the subject of future posts, allow for buyer substitution because approval letters are ‘non-buyer specific’, however BOFA is a bit more strict on the issue. When they issue an approval letter it is actually stamped with the specific buyer’s name
Stay tuned for more helpful hints. As always you can contact Rapid Real Estate Solutions (RRES) for help with your short sale challenges. You may also call 616-328-5127
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