How can an investor can speed up the short sale process?

A recent study of home owners nationally shows 28% are in default.  This represents a very large number of  properties.  It can be a great opportunity to buy property at a discount but the length of time to get offers accepted and closed can take six months or longer.  I have met some investors that make cash offers and throw out lots low ball offers to see if the banks will accept them.  A small percentage will be accepted even with all cash offers they can take months to close on a short sale deal.   It becomes a waiting game with the banks.  The biggest challenge is contacting the person at the bank that has the authority to make a decision about the short sale property. The bankers are swamped with hundreds of short sale cases.

When investing in short sales it is helpful to have good understanding of the time line foreclosure process.

1. 35 day acceleration letter from lender (generally at 3 months)
2. Duty Sheriff serves Summons and Complaint (Mediation)(5.5 months)
3. Answer and Request for Mediation (6.0 months)
4. First Mediation Session (9.0 months)
5. Final Mediation (12 months)
6. Discovery period of 90 days (15 months)
7. Motion of Summary Judgment filed (16 months)
8. Opposition file d(by homeowner) (17 months)
9. Summary Judgment Hearing (20 months)
10. Judgment enters and Docket and Appeal expire (21 months)
11. Redemption Period of 90 days runs out (24 months)
12. Auction Date is announced (24.5 months)
13. Auction occurs  (26 months)

If no one buys the property at the auction it becomes and REO.

In this above steps the most important steps to an investor are steps D and E.  The Mediation steps are where the lawyer and seller and banker get together and try to figure out what is going to be done with the property.  It is now a requirement that all forecloses go through a mediation process.  The great thing is that your real estate agent can go to the mediation.  During the mediation that can take several hours the banker has the authority to take offers on the property and negotiate a sale price for the property.   This is a huge opportunity to get a deal finalized so you can close a deal.  This has stream lined a process that would have taken months before.  During the mediation all of the bankers contact information will be given. This makes it so much easier to contact the banker at a later date if a decision is not decided on during the mediation.  Investing in short sales can be a great opportunity when and much sorter when you can take advantage of the mediation. 

By James Ernst  -  SMLA Board member