Short Sale Flow: Chart for Buyers

The process for buying a short sale is similar to the purchase of a conventional or bank owned property with a few key additions.  The biggest difference is that a short sale adds at least one more decision maker: the bank (there may be loans with multiple banks or multiple loans with the same bank).  This adds layers of complexity to the home purchase.  Prospective buyers of a short sale should read the Short Sales for Buyers Summary from the Oregon Real Estate Agency.  [Text continues below graphic]

Short Sale Process for Buyers Flowchart
Short Sale Process for Buyers

Once the buyer’s offer is accepted by the seller, the bank has to approve the offer.  This could take weeks, months or never happen at all.  A key consideration for the buyer is whether they can stay emotionally detached in the purchase.  In a typical sale, the buyer ultimately controls the decision to purchase or not.  The buyer has a number of outs though contingencies and can walk away from their earnest money and the transaction at any point.  The seller is obligated to sell under the terms of the accepted offer.  In a short sale, the bank approves (or doesn’t approve) the sale and may change the terms of the sale, and the seller and buyer have to accept the terms of the approval.

A short sale is not a good idea for those with a time constraint, a shortage of patience or fear of losing a property for no apparently logical reason. A short sale remains listed as “active” in RMLS until there is bank approval – even if there is multiple offers.  This means that other offers may be received and the property may continue to be shown.  If additional offers are received, they may be  held in back-up positions or submitted to the bank for consideration. Each bank and agent handles it differently. This is all outlined in the Short Sale Addendum that is submitted with the buyer’s offer.

In a standard sale, the time frames for the inspection period  and other contingencies begin with mutual acceptance between the seller and buyer and earnest money is due.  In a short sale, the time frames begin and earnest money must be deposited  once there is written approval from the bank and the seller has agreed to the terms.  The buyer can conduct inspections prior to approval but is impossible to recover those costs if the transaction fails. Sometimes it is worth doing the inspection earlier in the process so the buyer knows if it is even worth waiting.


3 Comments on “Short Sale Flow: Chart for Buyers

  1. “Someone” would need to get permission to use it :-). The vast majority of this site is based on providing education but what is on the site is ours or the source is cited. If you would like permission to use the charts and materials on this site, please ask.

Leave a Reply