A short sale is not always “short” in terms of how quickly they are processed. Many think that as an alternative to being foreclosed on, selling their home as a short sale is the quick and easy fix to a less than ideal situation. In reality, a short sale can take anywhere from three months to over a year, depending on the lender, the market and potential buyers.

So what is a short sale? A short sale occurs when the homeowner owes more on the mortgage than what the property is worth in the real estate market. The name “short sale” refers to the shortfall in the amount the lienholder receives on their loan.

Once a buyer presents an offer that the seller has accepted, a contingency for short sale approval is added to the contract of sale. In order to move forward with the real estate closing, the bank (or lienholder) has to agree to accept the amount offered by the buyer to satisfy the mortgage on the home.

Among the several factors that speed up or slow down a short sale transaction, the short sale approval from the bank is one of the main reasons the transaction can take months longer than a typical real estate transaction. The approval time depends on the bank, and what their short sale approval procedure involves. After the bank’s approval, the real work begins, and things like loan processing, appraisals, title work, etc. are ordered and prepared. This work is never done prior to short sale approval to ensure that an approval is obtained prior to the expenditure of time and resources in preparing the real estate transaction.

When facing a decision between foreclosure and a short sale, discuss the issues underlying these choices with your attorney. Your decision will be affected by your circumstances, along with the bank, the market, and potential lenders and should be considered on an individual basis.