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The first mistake investors make when approaching a short sale is so prevalent that it deserves its own separate article.

What is this mistaken belief?

Bogus Belief #1: Short sales are quick and easy.

This belief is bogus because banks have a tedious process they have to go through in order to agree to a short sale. They also have to explain the huge loss on the deal to their shareholders, and they have a lot less interest in seeing the deal move quickly than either you or your seller. Short sales thus take an unusually long period of time to complete.

To avoid making the mistake of believing that short sales are quick and easy, you need to understand the process and plan your timetable accordingly.

Once you have the property under contract and go to the lender to negotiate a short payoff, a number of things have to happen. First, the lender will order an appraisal or Broker's Price Opinion (BPO). The BPO is an informal appraisal done by a local real estate agent to give the lender some idea of what the actual value of the property is right now.

The lender will also ask for a hardship letter from the seller in addition to financial information (bank statements, tax returns and more) to prove to them that the seller really can't pay. This step alone can take four to six weeks, and only after this step is completed will the lender start the process of negotiating with you.

Every offer and counteroffer has to be ground through the gears of the lender's particular approval process. This means that every time you want to counter price or terms you can expect to wait a much longer period of time than if you were dealing only with a seller to get an answer.

And the secret reason short sales take an unusually long period of time to complete: loss mitigation officers are notorious for not returning calls or waiting for YOU to call THEM, even when they have the information you've been waiting for.

So even though you might only spend 10 hours of actual time on the deal, it can easily be two to three months before you're able to get an acceptance of a deal with the bank. That's why you should never put a firm closing date into a purchase contract where you're going to be negotiating a short sale. Instead, write that you will close "30 days after acceptance of purchase price by lender." Otherwise, your contract will expire a long time before the deal is finished.