Buyers frustrated with short sale taking too long

Q. My husband and I signed a contract to buy our first home about two months ago. We were told this was a short sale and that it may take a little extra time for the deal to go through. That was all right with us as we were both coming out of our parent's homes.

It is now two months later and no one can tell us when or if this deal will happen. Our attorney keeps calling the seller's attorney who keeps saying he has not heard anything. Meanwhile, we see other houses that we could be interested in and would like to go after if we can't get this one.

How long do we have to wait for this deal to happen? Can we get out of this contract? Our attorney keeps telling us to be patient and that short sales often take a long time to get approved. We don't mind waiting if this is going to eventually happen, but we would hate to find out two months from now that we cannot buy the house.

A. For those wondering what a short sale is, it is a transaction where the sales proceeds do not fully satisfy the mortgage obligations on the property. In these situations, the seller requests his or her lender or lenders accept an amount less than what is owed. Based on numerous factors, the lender either accepts, rejects or counters the short sale request. A counter usually involves requesting that the seller contribute additional funds at closing to reduce the lender's loss.

Most purchaser's attorneys attempt to build a time limit into short sales. Language would be added to the contract to provide that in the event seller's lender has not approved the short sale within 60 or 90 days from the date the contract was accepted, purchaser would have the option of terminating the contract and having all earnest money returned.

As to your situation, ask your attorney if the contract contains any terms which would allow you to terminate after a specified period of time. At the very least, in the event the seller cannot close by the closing date indicated in the contract, you should be able to terminate then, though there may be other provisions in the contract which could come into play. I suggest sitting down with your attorney and reviewing your options.

Q. Is it better to try and buy a property during the foreclosure process or after the bank takes ownership?

A. There is not an answer to your question that would apply to every purchaser or property.

For a sophisticated investor who understands the foreclosure process and the risks associated with it, it may be beneficial to purchase a property at the foreclosure sale. Certainly, there is less competition for the property than after the property hits the multiple listing service.

Most buyers, however, would be better off purchasing from the bank once the sale has occurred and the bank obtains ownership of the property. Although there are some quirks with purchasing bank-owned property, most of the risk is eliminated. It is a fairly routine purchase with most of the safeguards that exist in a standard transaction being preserved.

• Send your questions to attorney Tom Resnick at 345 N. Quentin Road, Palatine, IL 60067, by e-mail to tdr100@hotmail.com or call (847) 359-8983.