Why Banks Take So Long to Approve Short Sales (And How to Speed It Up)

If you’ve ever been involved in a short sale, you know the process can feel like waiting in the world’s slowest line — except instead of coffee at the end, you’re hoping for lender approval. While the delays can be frustrating, understanding how banks work behind the scenes can help you navigate the process more effectively (and maybe even shave off a few weeks).

The 3-Step Short Sale Process

Step 1: Qualifying the Homeowner

This is where most delays happen. Before the bank will even think about the offer on the table, they have to confirm that the homeowner qualifies for a short sale. This means proving a legitimate financial hardship — think job loss, medical expenses, divorce, or other life events that make it impossible to keep up with the mortgage.

The lender will also require a hefty stack of documents, which can include:

- Hardship letter

- Recent pay stubs (or proof of unemployment)

- Bank statements

- Tax returns

- Mortgage statements

- HOA statements (if applicable)

The challenge? Many files stall here because the bank won’t move forward until every single document they request is in their hands. Missing one form or an outdated bank statement can send you right back to the start.

Pro Tip: Gather all the required documents before you submit anything to the lender. Sending a complete package from day one can dramatically speed up Step 1.

Step 2: The Valuation

Once the bank agrees the homeowner qualifies, they order a valuation to determine what the property is worth in today’s market. This is usually done via a Broker Price Opinion (BPO) or a full appraisal.

Valuations are important because they set the lender’s expectations for what they’ll accept. If the valuation comes back close to your offer, you’re in good shape. If it comes in high, you might need to challenge it with better comps.

The good news? This stage usually moves faster than Step 1. A BPO can be completed in a few days, and a full appraisal might take a week or two.

Step 3: Offer Review and Decision

Finally, the lender reviews the offer. They’ll weigh the net proceeds against the property’s value and decide whether to accept, counter, or reject it.

If everything’s in order, this step can wrap up surprisingly quickly — sometimes in a matter of days. But if there are multiple lienholders, HOA debts, or unresolved title issues, you could be looking at more delays.

Why Each Step Gets Faster

The reason things usually speed up as you go is simple: the bank has more invested in the file. Once they’ve confirmed hardship and spent money on a valuation, they want to see it through. Plus, later steps involve fewer moving parts — no more chasing down pay stubs or hardship letters.

How to Keep the Process Moving

If you want to avoid the dreaded “file under review” limbo, here are my top tips:

1. Get organized early. Gather every document the bank might ask for before you even start.

2. Double-check everything. Make sure forms are complete, signatures are in place, and nothing is outdated.

3. Respond quickly. If the bank asks for an update or additional info, send it the same day whenever possible.

4. Work with someone experienced. Short sales are full of small details that can cause big delays if missed.

Bottom Line

Short sales can be slow, but they don’t have to feel endless. By preparing a complete file upfront, you can get through the toughest part — Step 1 — faster, which sets the pace for the rest of the process.

If you’re tired of waiting on hold with the bank and chasing paperwork, that’s exactly what I handle every day. I make sure short sales move from start to finish as smoothly (and quickly) as possible — so you can focus on the deal, not the delays.

The One Document That Can Make or Break Your Short Sale Approval

When it comes to short sales, there’s one document that can make the difference between a smooth approval and a flat-out denial — and it’s not the contract, the HUD, or the bank’s net sheet.

It’s the hardship letter.

This simple, 1‑2 paragraph statement can be the deciding factor in whether your lender agrees to accept less than what’s owed on your mortgage. And yet, it’s often the most rushed, under-thought, or misunderstood part of the short sale package. Let’s change that.

### What is a Hardship Letter?

A hardship letter is a short, personal statement explaining why you can no longer afford your mortgage and must sell the home in order to avoid foreclosure.

At one point, you were able to make the payments. Then something changed — a job loss, medical emergency, divorce, relocation, or another life event — and now you can’t.

Your hardship letter connects the dots for the lender, showing them there’s a valid, long-term financial hardship that justifies approving the short sale.

### Why It Matters So Much

Banks and mortgage investors don’t approve short sales just because a homeowner *wants* to sell — there has to be a verifiable reason you can’t continue paying the loan.

Your hardship letter:

- Sets the tone for your entire short sale review.

- Humanizes the file, turning a stack of paperwork into a real story.

- Supports other documents like pay stubs, bank statements, and tax returns.

- Helps the lender check a key approval box: “Is there a valid, ongoing hardship?”

Without a convincing hardship letter, even the best-priced offer and cleanest file can stall.

### How to Write a Strong Hardship Letter

You don’t need to be a professional writer. In fact, the best hardship letters are straightforward and honest. Keep it to 1‑2 paragraphs and include:

1. **Your situation before the hardship** – Briefly explain that you could afford the mortgage when you bought the home.

2. **What changed** – State the specific event or events that caused your income to drop or expenses to rise.

3. **Why selling is the only option** – Make it clear that a short sale is the only way to avoid foreclosure, and the hardship is long-term.

**Example:**

"When I purchased my home in 2016, I was fully employed and able to comfortably afford the monthly payments. In January of this year, I lost my job due to company downsizing. While I have been actively seeking new employment, my current income is not enough to cover the mortgage, utilities, and basic living expenses. I have depleted my savings and fallen behind on payments. Selling the home through a short sale is the only option to avoid foreclosure and further damage to my credit."

### Common Mistakes to Avoid

- Being vague — “I just can’t afford it anymore” isn’t enough.

- Over-explaining — Don’t turn it into a life story; stick to the facts.

- Blaming the lender — Keep it professional, not emotional.

- Forgetting to sign and date — Most lenders require a wet signature.

### Forms vs. Free-Written Letters

Some lenders require you to complete their specific hardship affidavit form instead of a free-written letter. Others will accept either. Always check your short sale package requirements — sending the wrong format can delay the file.

Even on a form, your written explanation should follow the same structure above.

### Final Tips for Success

- Sign and date the letter in ink unless your lender specifically allows electronic signatures.

- Be truthful — lenders can and will verify your financial hardship.

- Submit it early with your short sale package to avoid delays.

The hardship letter may be short, but it’s a make-or-break document. Done right, it shows the lender you’ve experienced a legitimate, lasting change in circumstances — and that approving the short sale is the most reasonable outcome for everyone involved.

For more on boosting your reputation as an agent, check out our pos on **5 Ways Short Sales Can Actually Boost an Agent’s Reputation (and Repeat Business)**.

And if you’re looking to keep your sale on track, don’t miss **How to Win Over a Short Sale Buyer**.

Why Some Short Sales Move Faster Than Others

When a short sale drags on for months, most agents and homeowners blame the bank servicing the loan. It’s an easy assumption — after all, the servicer is the one you’re talking to. But here’s the truth: it’s not always the bank that’s slowing things down.

In many cases, the real pace-setter is the investor who owns the mortgage behind the scenes.

If you understand who really calls the shots — and how their rules work — you can predict timelines more accurately, avoid frustrating delays, and even help approvals happen faster.

Servicer vs. Investor: Who’s Really in Charge?

The bank or servicer (like Mr. Cooper, PHH, Wells Fargo, etc.) is the middleman. They collect payments, handle customer service, and process your short sale paperwork.

But the investor — the entity that actually owns the mortgage — is the one that sets the guidelines and ultimately approves or denies the short sale.

Think of it like a property manager vs. landlord: the property manager may be who you deal with, but the landlord makes the final decision.

Why Timelines Vary So Much

Different investors have different rules for reviewing and approving short sales. Here are some of the most common examples and how they impact speed:

1. FHA & VA Loans – The “Waterfall” Requirement

If the investor is FHA or VA, the process is rarely quick. That’s because they require the homeowner to first go through a waterfall process — a series of “retention options” to see if the homeowner can keep the property before they’ll even consider a short sale.

Retention options might include:

Loan modification

Forbearance

Partial claim

Repayment plan

Only after the homeowner is found ineligible for these options can the short sale review begin. Translation: you’re looking at built-in delays before the real work even starts.

2. Fannie Mae – The HomePath Advantage

When Fannie Mae owns the loan, your offer will likely go through their HomePath system.

Here’s the upside:

The platform gives you direct access to Fannie Mae’s approval process.

You can often bypass some of the traditional back-and-forth with the servicer.

In many cases, this speeds up the review compared to other investors because you’re communicating closer to the decision-maker.

3. Mr. Cooper – Equator-Driven Process

Mr. Cooper requires short sale files to be managed through Equator — a platform built specifically for short sales and other loss mitigation processes.

Pros:

Clear, trackable task list.

Built-in messaging for quick updates.

Cons:

You must complete every single task in the system before the file moves forward.

Missing or delaying one step can stall the whole process.

For agents and negotiators who know how to work Equator efficiently, this system can keep things organized and moving.

4. PHH – Reverse Mortgage Specialists

PHH handles a large volume of reverse mortgage short sales.

These can be much more straightforward because:

The homeowner usually isn’t making payments.

The lender already expects to be paid from the sale or claim.

As a result, PHH can sometimes offer a streamlined review process — but only if you know their documentation requirements up front.

The Big Takeaway: Know the Process, Win the Timeline

A short sale’s speed has less to do with whether you’re working with “Bank A” or “Bank B” and more to do with:

Who owns the loan (the investor)

What their approval process looks like

How quickly you can get them what they need

The more you know about your specific investor’s playbook, the more you can:

Set realistic expectations with your client.

Gather the right documents early.

Push the right buttons to keep the file moving.

How Crisp Short Sales Keeps Deals Moving

We’ve worked with just about every type of investor out there — FHA, VA, Fannie Mae, Freddie Mac, private portfolios, hedge funds, you name it. That means we don’t just submit paperwork and hope for the best.

We tailor our approach to each investor’s process, anticipate their requests, and sidestep unnecessary delays.

The result? More approvals, faster closings, and happier agents and sellers.

If you’ve got a short sale that’s stalling — or you just want to make sure the next one moves as quickly as possible — reach out to Crisp Short Sales and let’s get it moving.