Many home buyers start seriously looking for a new home about three to six months before their preferred move date. Some give it even less time. But is two, three, even six months enough time? And does it affect what type of property you can try to buy?
Six, three, even two months may give you enough time to search for a new home, write and offer, go through the negotiation process, come to an agreement (ratify the contract) and then proceed to settlement - IF the property is a traditional resale or bank-owned (foreclosure). But it may not be enough time for a short-sale.
Though the time from which the offer is ratified to when settlement occurs is similar regardless of what type of sale it is, the negotiation process varies drastically especially when it comes to short-sales.
Here's the breakdown...
Traditional resales
A traditional resale is a sale in which the property is not bank-owned nor is the seller attempting to do a short-sale (definition of a short-sale later in this post). The owners are selling it directly to a buyer without needing final approval from a bank or other creditors.
Traditional resales typically take anywhere from a day to a week from the time you present an offer to when the negotiation process is complete.
If you've given yourself between 3 and 6 months, you'll be fine even if you don't get the first or even second or third house you've made an offer on.
Bank-owned properties (aka "foreclosures")
Bank-owned properties have been foreclosed on and are now being sold by the bank on the open market.
Bank-owned properties typically take a few days to two weeks to negotiate. The reason for them taking longer than a traditional resale is that you're dealing with the bank's asset manager - they have hundreds of files on their desks at one time and they don't work nights, weekends or holidays.
If you've given yourself between 3 and 6 months, you'll be fine even if you don't get the first or even second or third house you've made an offer on.
Short-sales
Short-sales are situations in which the seller/borrower is attempting to sell the property for less than what is owed on it (they're "short") and the seller/borrower is trying to get the bank/creditor to agree to take the loss. The bank/creditor must give final approval on the offer in order for the deal to take place. (For a more detailed explanation of what a short-sale is, click here)
The average response time from the bank on a short-sale is 3 months though I've seen responses take as long as 6 months. And here's the kicker...only about 20 percent of short-sales are approved.
If you've only given yourself 2 to 3 months before having to move, you're outta luck - short-sales are not for you. Even if you've given yourself 6 months, you may be cutting it close because it may take the full 6 months to hear a response. But...if the bank doesn't approve the short-sale, you're back to square 1 and you've lost an average of 3 months (if not more) of house-hunting time.
If you'd like to look at short-sale properties, you should give yourself enough time to find a home PLUS another 4 to 7 months (average response time plus time to close).
The home buying process is stressful for many - especially first time home buyers. The last thing you want to do is feel rushed or, even worse, find yourself having to double-move or living out of a hotel. That's why knowing the timing involved with each type of property and planning accordingly is so important.
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